EUR/USD Not Strong Enough To Break 1.1516

Trade-Ideas

  • EUR/USD: long opened at 1.1320, take profit at 1.1570, stop-loss raised to 1.1350
  • USD/JPY: short opened at 108.50, take profit at 105.50, stop-loss 110.00

Market Overview

The Federal Reserve may only need to raise interest rates once in 2019, Atlanta Fed President Raphael Bostic said, focusing on business executives' nervousness about the economy and a global slowdown as factors that may hold the U.S. central bank back.

"I am at one move for 2019," Bostic said. Though U.S. economic growth was faster than expected in 2018 and prompted the Fed to raise rates four times, Bostic said his business contacts appear less confident about the coming months, while "clouds" have developed overseas.

Bostic is not a member of the Fed's rate-setting policy committee this year. But his comments show how the combination of a recent selloff in stock markets and weak economic data from China and Europe has begun to shift the tenor of conversation at the U.S. central bank.

Last week, Fed Chairman Jerome Powell said the central bank would be "patient" as it assesses what to do next.

Particularly as the Fed's short-term policy rate approaches neutral, Bostic said the central bank needs to be careful not to go too far and unintentionally tighten credit markets too much. "This is an area where we have to watch robustly," he said. The current policy rate of 2.50% may be at or close to neutral and "if it is 2.50 and you go to two and three quarters or three, you might have tripped beyond neutral and that would be contractionary."

U.S. services sector activity slowed to a five-month low in December but remained above a level consistent with solid economic growth in the fourth quarter. The Institute for Supply Management said on Monday its non-manufacturing activity index fell to 57.6 last month, the lowest reading since July, from 60.7 in November.

Growth estimates for the fourth quarter are around a 2.6% annualized rate. The economy grew at a 3.4% pace in the third quarter.

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