FX.co ★ EURUSD: Will the Fed Chairman support the topic of interest rate cuts?

The US dollar continued to decline against risky assets after data that production activity in the US in May this year continued to slow down, and fell to its lowest level in 10 years. The problems in the US are the same as in Europe. Weak demand for American products and foreign trade tensions. But unlike the Europeans, the United States is the initiator of the entire conflict.

According to a report by IHS Markit, the purchasing managers' index (PMI) for the manufacturing sector of the United States in May 2019 fell to 50.5 versus 52.6 points in April. Let me remind you that the index values above 50 indicate an increase in activity. Economists had forecast the index to be 52.3 points.

As for the report of the Institute of Supply Management, it states that production activity in the United States also slowed down in May due to foreign trade tensions.

According to the data, the purchasing managers' index (PMI) for the US manufacturing sector in May fell to 52.1 points against 52.8 points in April. Economists had expected the index to rise to 52.3. The main problem remains the escalation of the US-China trade conflict. Let me remind you that in early May this year, the White House administration increased duties on Chinese imported goods to 25%. The rise of the US dollar, which was observed also in recent years, has affected the exports of the United States, which made it less affordable for foreign buyers.

Data on construction costs in the United States were ignored. According to the report of the US Department of Commerce, construction costs remained unchanged compared to the previous month and amounted to $1.299 trillion. Economists had forecast that spending in April would increase by 0.4%.

Speech by representatives of the US Federal Reserve, and in particular the President of the Federal Reserve Bank of St. Louis, James Bullard, put pressure on the US dollar.

Bullard said that a reduction in the rate may be justified in the near future, which will achieve the desired growth of inflation and maintain good economic growth.

The topic of interest rate cuts has long been among representatives of the Fed, but no one has seriously stated the need for monetary policy easing.

Bullard also noted that the risks to the prospects of the US economy are growing, as trade problems slow down global investment, and further uncertainty in this direction will soon harm the financial sector.

The representative of the Fed also drew attention to the fact that not only he is wary of interest rates and considers them too high. Recent statements by US President Donald Trump on foreign trade issues have forced some banks to also expect lower interest rates from the Federal Reserve.

Today will be the speech of Fed Chairman Jerome Powell. Traders will closely monitor whether he will share the point of view of his colleagues or will continue to adhere to the current monetary policy.