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Home / Analytics / Forex analysis & forecasts / Forex Fundamental analysis / The Euro is falling. Overview for 16.06.2016
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The Euro is falling. Overview for 16.06.2016

On Thursday afternoon, the main currency pair is moving downwards despite neutral decisions from the FOMC and its restrained language.

The Eurodollar is declining on Thursday afternoon. The current quote for the pair is 1.1182.

The two-day meeting of the USA Federal Reserve System, which was over yesterday, ended in nothing: the interest rate remained unchanged at 0.50% (the target range in still the same, 0.25 – 0.50%). The discounting rate remained at 1.00%; the decision to keep the rate was unanimous. The median average indicates that the average expectations of the rate by the end of 2016 is 0.875% and by the end of 2017 – 1.625%. In the long-term, the rate is on its way to 3%.

The FOMC revised economic forecasts for this year and the next one. On average, the GDP growth rate will be about 2%, the unemployment in 2016 will be not more than 4% and not more than 4.6% in 2017. The further reduction of the unemployment will be rather difficult. This year, the inflation may rise a little bit, up to 1.7% (base case), and 1.9% in 2017. The target for the CPI is 2%. Judging by the sentiments inside the FOMC, most members of the monetary committee are expecting the rate to be increased in 2016 only once. So far, the market thinks it might be twice.

In her comments following the results of the meeting, Janet Yellen noticed that previous macro statistics reports were weak. It is nothing to be surprised about – the updated inflation report will be published only today, and the employment statistics was rather complicated. It’s not enough to be a point of influence. Yellen mentioned the slowdown in some sectors of economic activity, which was rather “surprising”. At the same time, it’s important not to be too sensitive to the latest employment reports. All this was said by Yellen before. Only one remarks seems to be interesting here – the FOMC may respond to the inflation faster in case the CPI provides corresponding signals. The point at issue is that the rate may grow faster, provided that macroeconomic resources allow. Wisely, carefully. It looks like it remains the slogan of the Federal Reserve System.

Needless to say that the Dollar responded to these comments with decline. However, today the American currency is in demand again. It is also as it should be, because the FOMC doesn’t call off its plans – it just waits for the appropriate time.
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