FX.co ★ Unexpected growth of the euro

The dollar was hit hard last week. At first, the content of the minutes of the meeting of the Federal Commission for Open Market Operations was very disappointing. It indicated that the Fed would not raise the refinancing rate in December. The second blow to the dollar was inflicted at the very end of the week when it became known that a number of influential SPD representatives proposed the creation of a broad coalition and the formation a government with the CDU / CSU. The leaders of the eternal allies of the party, headed by Angela Merkel, are extremely skeptical of such proposals. Moreover, immediately after the elections, they declared that they are going to the opposition. So if the SPD, in spite of the opinion of some of its influential members, refuses to negotiate with the CDU / CSU, Germany will not pass early elections and the situation on the EUR/USD pair will return.

At the same time, it is worth noting that American statistics were by no means ideal. Home sales in the secondary market grew by 2.0%, which is quite good, especially against the background of a slowdown in the growth of retail sales. However, orders for durable goods fell by 1.2%. That's why we can not expect to restore consumer activity. Rather, we can expect it to further reduce. Moreover, preliminary data on business activity indices showed a decline in all indicators.

If you look at the data this week, the dollar has no compelling reason to resume growth. Thus, home sales in the primary market may be reduced by 6.3%. This also means that there is no real reason to increase inflation and consumer activity. However, the second estimate of US GDP for the third quarter is also likely to show that the rate of economic growth accelerated from 2.2% to 2.3%. Nevertheless, this has already been taken into account by the market. Meanwhile, in Europe, preliminary data on inflation may show a growth from 1.4% to 1.6%, which will have a very beneficial effect on the value of the euro.

Despite it, all this data can be ignored if it becomes known that the SPD will not go on forming a coalition with the CDU / CSU. This means that early elections will be scheduled in Germany. Europe is not in the most stable economic situation and the political crisis in Germany will only exacerbate the state of affairs. This is exactly what will most likely happen.

If we are talking about early elections in Germany, then the EUR/USDr pair will finish the week at 1.1775. If the two largest parties in the Bundestag agree, then growth to 1.2050 is possible.

The GBP/USD pair, due to the absence of any data, will follow the euro through the dollar index. So there is a high probability of the pair falling to 1.3250. Growth is unlikely but if everything is completed successfully and Germany will not announce early elections, then the pair may grow to 1.3425.