Forex Weekly Outlook October 30 – Nov 3

The US dollar sustained gains against its counterparts last week following the adoption of 2018 fiscal budget by the senate and the better than expected economic growth rate recorded in the third quarter. While consumer prices remain below the Fed’s 2 percent target and wage growth is yet to pick up substantially, the economy remains resilient and predicted to expand just below the 3 percent target of President Donald Trump in 2017.

Similarly, the possibility of the tax reform finally coming to fruition, after the adoption of 2018 fiscal budget, strengthens the US assets, and this is expected to continue through December 2017 and further bolster the US dollar outlook in the final quarter of the year.

Therefore, the US dollar is likely to sustain its gains in the fourth quarter if uncertainty, like missile threat and market surprise ahead of the Federal Reserve appointment remains minimal.

In Europe, the Euro common currency plunged against the G10 currencies last week even with growing economic outlook and improved new orders. This is partly because of the uncertainty surrounding Spain-Catalonia independence and the failure of the European Central Bank to meet market expectation during monetary policy meeting last week. The central bank announced it would cut down on asset purchase program to 30 billion euros from the current 60 billion euros starting from January 2018 through September.

However, it also warned this amount can be increased or the duration extended depending on the economic condition in the region, while at the same time saying seemingly growing price pressures is likely to subside in 2018 and predicted to remain below its 2 percent target up until late 2019.

This mixed economic outlook amid sluggish wage growth and weak inflation rate was interpreted by the market as ‘no interest rates hike anytime soon’. Hence, the fall in the Euro single currency.

Below are weekly forex projection;