On Friday, EUR / USD was in market spotlight as currency pair showed a rather strong decline and dropped to its lowest level in 20 trading days. Such bearish Euro dynamics is somewhat associated with both the weakening of the euro and the strengthening of investor interest in the US currency.
There are concerns that Eurozone economy is slowing down. Statistics published in Europe continues to indicate an economic activity decline in the region, which made the ECB last week change its forecasts for the EU GDP growth rates for 2018 and 2019. Obvious economic and political problems in the leading economies of the EU (Germany, France, Italy) create serious risks for the European currency, deterring investors from its active purchases. Today, positive news has broken that Italian ruling coalition has agreed on the key parameters of the Italian budget for 2019 and is ready to submit a new project for consideration by the European Commission, but investors are now concerned that France, with a high budget deficit, may follow the Italy path.
On the contrary, the dollar last week was in high demand and on Friday the dollar index was able to reach maximum levels in 20 months of trading. The reason for the strong strengthening of the dollar was the data of domestic statistics on retail sales and industrial production. The economic situation in the US is still significantly better than in the EU, so the dollar objectively remains more attractive for investments than the euro.
The main risks for the US currency are still associated with uncertainty about the Fed's future actions to change interest rates. Most experts agree that at a meeting on Wednesday, the Fed will raise the rate by 25 basis points, but this is a very expected decision and it is almost completely priced into current market levels. The Fed plans for 2019 are much more interesting for investors; therefore, updated economic forecasts, anonymous Fed officials' forecasts of interest rate changes, as well as comments by Jerome Powell will have a very strong influence on further trading dynamics. This is the last full trading week in global markets and it is obvious that it will be very volatile and intensive.