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The new 2018 began with a further weakening of the dollar. The index of the dollar WSJ, reflecting the value of the US currency against a basket of 16 currencies, shows the negative dynamics for the sixth consecutive session. The past year has become for the index of the dollar WSJ worst in a decade. The index lost more than 7% in 2017.
There are 2 weeks before the celebration of the New Year. The coming week is the last trading week before the Catholic Christmas, and already on the following Monday, the volume of trading is expected to decline, but at the same time the increase in volatility is expected. At low volumes, the number of speculative short-term trade transactions often increases, which leads to increased volatility, especially during news releases.
we expect an extremely volatile and busy trading week with important news. In addition to the Fed meeting, which will be held on December 12-13 and will be the last one this year, important decisions of the three leading central banks of the world and fresh data on inflation are expected. So far, on the eve of the statements of the Fed, the Swiss National Bank, the Bank of England and the ECB on monetary policy, trading in financial markets is calm.
The beginning of a new week turned out to be promising for investors who are betting on the growth of US stock indices and the dollar. As it became known, last weekend the US Senate finally adopted a bill providing for lowering the tax from companies to 20% from 35%. Now, after agreeing some provisions of this bill, the US president will be able to sign it. Undoubtedly, this is the victory of Republicans and Donald Trump in the implementation of a new economic policy that will accelerate economic growth and inflation in the US.
This week promises to be extremely volatile due to the saturation of the important economic news, and speeches by key figures from global central banks, such as the Fed, the Bank of England, the Bank of Canada, and the ECB. OPEC meeting which will be held in Vienna on November 29 is separately standing important event.
The focus of traders this week will be the publication on Wednesday (18:00 GMT) of the minutes from the November Fed meeting (minutes FOMC). The publication of the protocol is extremely important for determining the course of the current policy of the Fed and the prospects for raising the interest rate in the United States. According to interest rate futures, the probability of a rate hike in December in the US is above 90%.
It is expected that in the coming week in the US House of Representatives will vote on the tax reform. But, it seems that in the Senate, the bill is expected to face considerable resistance. Senators and members of the House of Representatives have a slightly different vision of the future tax reform. Senators want to postpone the reduction of corporate tax until 2019 and make some changes to the project itself. Obviously, it will
A number of economists still recommend betting on the dollar, despite the fact that the new chairman of the Fed is unlikely to raise interest rates more than the market already takes into account, given the "favorable conditions for the growth of the American economy". The focus of traders this week will be meetings of the ECB, the RB of Australia and the RB of New Zealand.
The dollar remains the favorite in the foreign exchange market. Positive data on retail sales, industrial production, orders for durable goods, companies sentiment, and strong GDP (up 3% in the third quarter, with a forecast of 2.5%), coupled with positive reports from companies and the success of the presidential administration in the conduct of economic reforms in the US contribute to maintaining the positive dynamics of the US stock market and the dollar.
The most important event of the week will be the decision of the European Central Bank on the interest rate, as well as the press conference of the head of the ECB Mario Draghi and ECB comment on monetary policy, which will be held on Thursday. Despite the obvious economic growth, inflation in the Eurozone still does not reach the target level of the ECB at the level of 2% per year. Therefore, as is widely expected, the ECB will keep the interest rate at zero level, and the deposit rate is negative at the level of -0.4%. It is likely that this decision will not have a strong impact on the euro. Greater interest will be the speech of Mario Draghi at a follow-up press conference. If he signals the curtailment of the QE program in the near future, the euro will respond with growth.
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