The euro/dollar exchange rate consolidated around 1.1600 on the last day of the week. At the beginning of last week, this currency pair was holding near the 1.1724 mark, and this indicates an increased demand for the US currency. A downward trend is visible, which in turn pushes the participants of the foreign exchange market to continue to focus on selling euros in favor of the US dollar.
It is important to note that the latest signals from the US Federal Reserve are increasing demand for the US currency. Back on September 22, the regulator let the financial markets know that it was time to curtail stimulus measures by mid-2022. Previous years were as soft as possible for the US economy, such measures were needed to stimulate consumption and increase the inflation rate. In addition, do not forget about the pandemic, when retail sales, including sales on the real estate market, were under the blow of a deadly infection. This created panic and led to the decision of the US government to impose strict quarantine restrictions. Now the circumstances have changed – vaccination and a decrease in the incidence of Covid-19 are changing the situation in the country for the better. Therefore, after such a signal from the regulator, the financial markets noted that a cycle of rate increases had begun.
At the same time, it is likely that Fed Chairman Jerome Powell will announce a reduction in monthly asset repurchases at the November meeting. It should be noted that $120 billion is currently allocated for this. This may be the starting point for tightening monetary policy. Therefore, the achievement of new minimum values of the euro/dollar exchange rate this year is not excluded. The downtrend is set, it remains to determine the entry points according to the current market situation.
As for the important publications this week, it is worth paying attention to the US unemployment rate. The September indicator will be published on Friday, October 8, the experts' forecast is 5.1% against 5.2% a month earlier. If the data unexpectedly turns out to be better than the forecast, then the market will receive another strong signal about the Fed's intention to tighten its monetary policy.
In the forecast, the euro is expected to decline to 1.1500 and below.