The first half of this month was held in anticipation of the results of meetings of the Fed and the ECB on monetary policy. This constrained the markets, since if in the case of the Fed meeting, the consensus forecast implied another increase in interest rates by 0.25%, the key to 2.0%, then the situation with the ECB was not so obvious.
The Fed hiked interest rates and made it clear that the process of a smooth rise in the cost of borrowing will continue not three, but four times this year and will spread further to 2019 and 2020. This did not surprise investors, but the result of the meeting of the European regulator was unexpected for most market participants, which caused the collapse of the European currency. We, by the way, did not belong to this majority, because in the winter we expected that the ECB would not decide to completely stop the program of quantitative easing in September due to the deceleration of inflationary pressure and the general fear of the central bank by the stability of economic growth. But now the situation seems to us only worsened, and the reason for this is the notorious D. trump, who increased import duties on aluminum and steel from the EU to the United States. These US measures threaten the European economy with significant financial losses, which can expand to the German automotive industry, which will be if not a disaster for the first EU economy, then a strong blow.
Assessing such probable prospects, as well as the decision of the ECB not to stop stimulus measures in September of this year and continue them until the end of the year, albeit at a lower level - 15 billion euros against 30 billion euros at the moment, we believe that the single currency may continue its decline against the US dollar. An important role played by the awareness of market players that there is a renewal of discrepancies in the monetary policy of the Fed and the ECB is clearly not in favor of the euro. Since the Fed, in accordance with the promises, will continue the process of a smooth increase in interest rates, and the ECB at best to stop incentive measures. At the same time, as the head of the Central Bank of Belgium J. Smets said on Friday, there is a possibility of renewal of stimulating measures in the future. Proceeding from this scenario, we believe that the euro/dollar pair should be sold on corrective growth.
Assessing the reaction of other major currencies, and not only them, on Thursday, following the ECB meeting, we believe that the dollar will grow against them, as the beginning of the active phase of trade wars will deter many central banks from wanting to raise interest rates.
The forecast for today:
The EURUSD pair is trading above the level of 1.1550. It may resume its fall towards 1.1470, if it overcomes the mark of 1.1550.
The AUDUSD pair is also under pressure. It has the potential to continue its fall against the backdrop of the entry into force of new US customs duties against China, which will hit the economic growth of China and will have a negative impact on Australia's exports to China, as it is the main for the first. Given this, the pair can overcome the level of 0.7425 and fall to 0.7375.