The dollar has almost achieved a key level of 1,4 on euro on results of two last week trading sessions.
Today the market is consolidated expecting FOMC decision on the basic rate of the Federal Reserve - the federal funds rate.
The overwhelming majority of analysts consider that the rate will be reduced and that it will be forced step of FRS. The situation in the market of the real estate and in sphere of mortgage lending remains critical and signs of way-out from this position is not observed. Moreover, by experts’ estimations the crisis phenomena start spread to other spheres of economy of the USA about which reports on the American economic indicators testify. Last data on the labor market, retails and industry were simply depressing.
In these conditions FRS does not have a choice, despite of risks of rise in inflationary background which can level possible economic growth, decrease in the rate will be a unique way-out for the Federal Reserve from the situation.
On the other hand a situation is also complicated by the risk of increase of the inflationary background remains real threat for the US economy because of a record rise in energy prices and, first of all of oil. Last week the prices for October oil futures at NYMEX tested a record level of 80 dollars per barrel.
Moreover, experts of oil market suppose that this price level is not a limit yet as growth of world energy demand outpaces the offer, and peak of demand is expected in 2012. Goldman Sachs company rose the forecast for oil prices by the end of year up to 85 dollars a barrel, having noted that there is a real danger of a rise in oil prices up to levels above 90 dollars a barrel.
As market analysts does not doubt in drop in FRS rate at least by 25 basic points, up to 5,0 % per annum, traders estimate probability of reduction in a percentage level of the rate even more, by 50 basic levels, up to 4,75 % per annum. However, in opinion of many analytical agencies the Federal Reserve will hardly make so radical measures on a background of high inflationary risks.
At last session of the European Central Bank the level of ECB rate remained constant, thus, if tomorrow FRS rate is raised the differential of ECB and FRS rates will reach a minimum level for last four years. It will lead to that the dollar will continue its falling. The price of 1.4 dollars for euro became already a reality and by the end of year a new prospective target level for the price of dollar on euro can be determined. By the end of year the level of 1,45 can become quite real price of euro to dollar.
On the open positions: on euro stop is placed at 1,3820, at fixed profit, the pound sterling was closed in break-even.
