Thursday was a day off in the United States. Against this background, the investor's activity in the foreign exchange market was noticeably lower and further fell by the end of the trading session. All throughout yesterday, the market continued to acquire negative news for the US dollar. As mentioned the same thing, the overall situation should be understood.
The published minutes from the last meeting of the Federal Reserve indicated increasing fears of some Fed Reserve members that the basic consumer inflation will not reach the 2.0% target in the coming years. This was also previously announced by Fed Chair Janet Yellen.
Despite the inability to reach 2.0% base component of the US inflation, the estimated outlook shows an annual growth rate of 2.0% based on the latest data. It was actually positioned at the target level, however, there are some barriers. The Fed estimates the consumer inflation according on the base value of the index that remains at a level slightly below the target of -1.8%, although the rate has increased from 1.7% to 1.8% according to the latest data.
In our opinion, the Central Bank believes that inflation will continue to increase dynamics. And these events have underlying reason for each, which include the fall in unemployment to the level of 2000, the 4.1%, target increase in crude oil prices to stimulate higher gasoline prices and industrial inflation. Another important point is the resumption of wage growth that gained 3.22% against the August growth of 2.75% according to the latest September values.
As expected, the complaints of Yellen are understandable which pointed to the main reasons for increasing inflationary pressures, but it does not manifest entirely. On the other hand, there are some who neglect them, which can ultimately lead to an explosive nature of inflation. With this, it is believed that the US regulator along with the resignation of Yellen will resume the move on its current course. Therefore, these are the reasons for the serious weakening of the dollar.
The decline occurred on Wednesday and Thursday can be viewed as local and speculative, and nothing more.
Forecast of the day:
The GBP/USD pair has reached the local maximum of 1.3340, but could possibly continue to remain in the range of 1.3050-1.3340. In our opinion, the pair needs to be sold at a target level of 1.3050.
After selling, the USD/JPY pair stopped at the level of 111.00 and turns up in the wave of overselling. It would likely reach 112.00 for today.
* The presented market analysis is informative and does not constitute a guide to the transaction.