The speech of the head of FRS on Thursday may affect the dollar rate | IFCM
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The speech of the head of FRS on Thursday may affect the dollar rate

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Good day, dear traders. Let us review the major economic events of the past week. Last week the US dollar index rose within the sideways market. Investors expect further Fed explanations regarding a possible monetary policy tightening, and also new macroeconomic data on US economy.

But let us go back from the global trends to the events of last week. The euro tumbled on Tuesday, after it was reported that the ECB was considering the possibility to launch corporate bonds purchases program starting from December. Investors counted on its earlier launch. There was another negative factor: a few European banks failed the ECB stress test. On Wednesday the US Consumer Price Index for September came out slightly higher than the forecasts, by only 0.1% at 1.7% YoY. That was enough to increase the returns on US bonds.

Investors started purchasing them, and the dollar consolidation continued. Note that the Fed considers the inflation rate to be normal if it is below 2%. On Thursday the US dollar index continued to rise due to good economic statistics, as evidenced by some non-major economic indicators such as the Leading Indicator Index, which rose in September. Of course, all this data was not enough for the dollar rally to continue, so it fell slightly on Friday and Monday amid modest euro consolidation. Among 130 European banks 25 failed the ECB stress test, but investors decided it to be not so bad news.

We assume that data on US economy that will be coming out this week will be very important for the Forex market. Durable Goods Orders for September and Consumer Confidence index for October will be announced on Tuesday. The Fed meeting will take place on Wednesday: it is expected that the completion of the quantitative easing program QE3 will be announced. The first estimate of the third quarter US GDP will be released on Thursday, and also the Fed Chair Janet Yellen will be giving her speech the same day. Data of lesser importance will be announced on Friday, which may also affect the dollar rate: personal income and spending numbers, Chicago Fed National Activity Index and The University of Michigan Consumer Sentiment Index (MCSI).

On the whole, we believe the US data forecasts to be positive. However, a positive speech of the Fed Chair is needed for the resumption of the uptrend of the dollar index. Subsequently, the most important day of this week will be Thursday. Regarding the euro, we expect that its dynamics will be influenced by the ECB statements about the conditions of the bonds purchase program. Significant macroeconomic data, including inflation and unemployment rates will be released in the EU on Thursday and Friday, but their outlook is neutral. Therefore, investors will likely focus on US information. This was all for the past week, see you ne

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