12, October 2017

FOREX consolidation continues, as US inflation data eyed

Yesterday FOMC protocols did not bring new details for analysis, as the overall picture remains the same. Many FED officials are still concerned about low inflation.

In general, the September report can be characterized as moderately positive. Hurricanes that hit the United States, according to the leaders of the Fed, should not have serious consequences on the leading world economy, and are perceived as just temporary negative factor.

Most representatives of the US Central Bank consider it appropriate to raise rate in 2017, but the voices of opponents express concern about the stably weak inflation, that now put pressure on the US dollar. Though US dollar recovers some losses today, it fell against all major competitors during the week.

Now the focus of the market is on tomorrow's data from the US on the consumer price index.

In the meantime, ECB and Bank of England have their own problems.

Officials from the ECB Governing Council are increasingly complaining about too strong European currency, which implies their reflection on the terms and amounts of asset purchase program. Inflation lately has grown, but clearly does not reach the target of the European Central Bank of 2%. And here were added political problems in Spain and Catalonia's attempts to hold a referendum on independence. Spain's leader Mariano Rajoy understands perfectly well how this can end, because about 90% of the inhabitants of this region are ready to vote for the independence of Catalonia. The only way to solve the issue is to act with compromise.

In turn, the Bank of England must fight the growing inflation, which has increased especially lately. The economic growth is rather weak and leaves much to be desired. But it is necessary to take measures. The political situation in the UK is also far from ideal, the chair under Prime Minister Theresa May is staggering, and this leaves its mark. The question of Brexit also does not move from the dead end, and the process  will be very long and extremely difficult.