Local slump of Euro and the question of the rate hike

This article was written at the opening of the US trading session on September 20, 2017
The most significant event in the first half of today was the release of UK retail sales data for August, which far surpassed expectations. On this optimistic news, the GBP/USD pair hit 1.36, which will be the resistance for the near future.
The retail sales data once again confirm that Great Britain has entered a state of fairly high inflation. How might this affect the market in the long term? The recent September comments by Bank of England representatives regarding a near-term tightening of monetary and credit policy are a counterweight to the economic situation. If we put the uncertainty related to Brexit on one side of the scale, then it is rather naïve to believe the English regulator’s hawkish rhetoric.
Nevertheless, this Friday we are awaiting the speech by Foggy Albion’s prime minister, Theresa May, who is supposed to comment on the status of the €20-billion payment to exit the EU. We think that this is the event that investors will focus on.
This week’s mega-event of course will be the announcement of the results of two-day meeting of the US Fed’s Open Market Committee. According to Bloomberg data on the eve of the announcement, the probability of an interest rate hike at the September meeting is 0.6%. It is anticipated, however, that the Federal Reserve will announce its plans to reduce the national debt ceiling, i.e., to curtail re-investment in bonds and to sell the impressive package of bonds it holds. These steps will undoubtedly be a blow to the US stock market, which is now feeling great, but will breathe strength into the dollar.

Olga Potapenko, exclusively for Olymp Trade

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