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Dollar legs to stand on. Form a position on EUR / USD depending on the US employment data


If the US labor market will not fail in December, the dollar will be noted by the best week the dynamics of the last couple of months. The growth of geopolitical risks in the Middle East, strong macro statistics in the States and doubt the effectiveness of the strategy for expanding the divergence in the growth of global GDP and US GDP allowed "bears" on the EUR / USD pair lower quotes to the base of the 11th figure. Will the continuation of the banquet sellers? On this question the American employment will respond. 



Bloomberg experts expect its growth to 160 thousand, which is slightly lower than in November (266 thousand), but higher than that required for the adaptation of the labor market to increase the population. Employment at the end of 2019 could grow by 2.14 million. Yes, it is the weakest figure since 2011, but it surpasses made at the end of 2018 economists forecasts for half a million. According to them, the average increase in non-farm payrolls in 2020 will decrease from 178 thousand to 127 thousand. The uncertainty around trade war the United States and China, the Middle East conflict, the presidential elections in the United States and sluggish dynamics of global demand is likely to slow corporate investment, which has a negative impact on the labor market. 


Dynamics of American employment


Source: Bloomberg.

However, what will happen tomorrow, nobody knows. So far, Fed officials have expressed confidence in the strength of the US economy, argue that monetary policy is in the right place and change the federal funds rate in 2020 is not required. This position is held not only centrist Fed Vice Chair Richard Clarida, but "blue" presidential FRB of St. Louis and Minneapolis Fed, James Bullard and Neil Kashkari. 

Greenbacks feels confident in part because of the growing popularity of Donald Trump. According to a December poll of the Peterson Institute and the Financial Times, 51% of respondents believe that its policy "strongly" or "somewhat" helped the US economy. This is the first positive result since the beginning of the monthly research in October. In November, a positive 44% of the survey participants, 47% were determined to believe that the US president does harm to the economy. 

In my view, the White House has proven that he can achieve his goals. His protectionism leads to a reduction in the US trade deficit and at the same time does not create any problems of GDP. Trump was able to improve the terms of trade with Mexico, Canada and Japan. States stands on the verge of an agreement with China, according to which, the Celestial Empire is committed to increase purchases of American agricultural and other products, to prevent the devaluation of the yuan, to increase access of foreign companies to the local market and better protect the intellectual property of US-resident corporations. 

Thus, the strength of the US economy, the Fed's confidence in its bright future and increase the credibility of the Donald Trump policy allow the dollar to stand firmly on his feet. Positive US labor market from December will increase downside risks EUR / USD to 1,1055-1,107. Weak statistics, on the other hand, will allow the pair to go into consolidation range 1,11-1,118.


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