Forex Forecast

EURUSD, GBPUSD. The main event today is FOMC decision on rate. Today the dollar again was under pressure, this time the European currencies were supported by positive data over Europe and weak fundamental data over the USA. Key data on the European Union indexes of business optimism of Munich independent research institute IFO over Germany showed positive dynamics of economic development in this country. Unexpectedly positive data for last 4 months caused an impulse of euro purchases against the dollar and pound sterling. According to IFO report the index of the business moods, made on the basis of survey of 7 thousand heads of the German enterprises, grew up to 105,3 points against 104,9 points in September. Economists expected drop in the index up to 104,5, according to the average forecast of 39 analysts polled by Bloomberg News agency. Growth of business moods happened first of all due to unprecedented reduction of oil prices when during a month oil prices moved down on an abrupt downtrend more than 25 %. As a whole, Ifo index was more favorable than the index of economic expectations of the German Center of economic researches in Europe ZEW. The ZEW index in October decreased to the lowest level since March, 1993. Earlier there were published data on moods in business circles in France in October not so considerably, as it was predicted. According to Ifo report, the index of moods in a manufacturing industry of Italy in October rose up to 20,2 from 18,4 in September. The index of moods in retail trade decreased to -7,4 against-3,8. The euro was supported also by statements of high-ranking officials of the European Central Bank. The member of ECB board Aksel Veber declared that probability of the further increase of interest rates in Eurozone in 2007 should not be excluded, as current decrease in inflation has temporary character, and the probability of growth of consumer prices is still great. On a background of a positive over Europe weak data on the market of the real estate of the USA before FOMC decision on the rate caused a wave of dollar sales. The market of the real estate is one of indicators of a business climate, which is considered by FRS at decision-making about monetary policy. According to the data of National Association of Realtors (NAR) published today, in September the existing home sales in the USA again reduced the 6-th month in a row - this time by 1,9 % up to 6,18 million in comparison with August decrease by 0,5 % up to 6,30 million This falling became maximal since January, 2004 and surpassed more moderate forecasts of analysts. According to the forecast of 77 economists polled by Reuters agency, sales in September should have fallen only up to 6,23 million. In annual calculation of the house price decreased 2.2 % up to $220,000, that became the second monthly drop in a row. Today the main event becomes announcement by FOMC the decision on the rate of federal funds. The overwhelming majority of analysts consider that FOMC will not risk firming monetary policy and will leave the rate at a former level. Signs of stagnation, about which indicators of housing market and industrial production signal first of all, show a prevalence of decrease in rates of economic growth before rise of inflation. Today it is recommended to close all the deferred orders. The surprise can be FOMC decision on the rate increase, therefore it is possible to be FOR dollar at the publication of such decision. If the rate is not raised - reaction of the market will most likely be minimal so such development of events is basically won back by the market.

source: openforex