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17.12.2015 19:20

American focus: the US dollar strengthened significantly against the major currencies

The euro depreciated significantly against the US currency, reaching a minimum 7 December. Investors began to buy back the dollar after the Fed raised interest rates and signaled that the next rate hike will be carried out gradually and will depend on economic data. Although the FOMC decision virtually coincided with market expectations, it nevertheless supported the dollar. "The Fed expects the development of the economic situation, which would require a gradual increase in key interest rates," - said in a statement the Fed. According to the new median forecast of 17 heads of the Fed, they expect the key interest rate by the end of 2016 will be increased to 1.375% by the end of 2017 - up to 2,375%, and by the end of 2017 it will reach 3.25%. This includes four rate increases by a quarter percentage point next year, raising four in 2017 and three or four to increase in 2018. This slower rate of increase than the heads of the central bank's forecast in September, and much slower than in previous cycles of rate hikes.

The growth of the dollar also contributed to today's data on the US labor market. The Labor Department said the number of Americans filing first time applications for unemployment benefits fell last week, a sign of the stability of the labor market. Primary applications for unemployment benefits fell by 11,000 and reached a seasonally adjusted 271,000 in the week ended December 12. Economists had expected 275,000 downloads last week. Primary treatment in the preceding week, have not been revised and remained at 282000. The four-week moving average of applications, which smooths weekly ups and downs, fell by 250 to 270,500 last week. The report also showed that repeated applications for unemployment benefits fell by 7,000 to 2.238 million in the week ended December 5th. The Labor Department said that there were no special factors influencing the latest weekly data.

The pound dropped significantly against the dollar, by updating an 8-month high. The strengthening of the US dollar contributes to the fact that the market is regarded as the Fed statement yesterday indicating a propensity to further tighten policy. Fed not only raised rates, but also published an optimistic outlook about the prospects for the US economy. Earlier in today's trading the pound was little support from the statistics on retail sales. Office for National Statistics reported that UK retail sales rebounded faster than expected. Retail sales rose 1.7 percent in November from October, when they fell by 0.5 per cent. Economists had forecast an increase of 0.5 percent in November. Sales excluding automotive fuel rose by 1.7 percent. It was expected that sales will grow by 0.5 percent after easing 0.8 percent in October. On an annual basis, retail sales including automotive fuel, increased by 5 percent compared to 4.2 percent in October. It was expected that growth will slow to 3 percent.

The Swiss franc depreciated moderately against the dollar, reaching a minimum of 8 December due to the resumption of demand for the greenback after yesterday's Fed meeting. In addition, the investors have paid attention to current forecasts from SECO and the Swiss KOF. Recall, the State Secretariat for Economic Affairs, or SECO, has maintained its growth forecast for the Swiss economy in 2016, and forecasts that inflation will return to positive territory only in 2017. In the winter forecast Expert Group noted that the GDP will expand by 1.5 percent next year, coinciding with the previously announced by the assessment. The forecast for 2015 was reduced - to 0.8 percent from 0.9 percent. In 2017, the economy is expected to expand by 1.9 percent.

Meanwhile, in the KOF Economic Institute said that the Swiss economy is likely to grow more slowly this year and next than previously assumed. The reason for this is the effect of the abolition of the lower limit for the pair EUR / CHF at the beginning of January, which will continue until mid-2016. The KOF expect the economy to expand by 0.7 percent this year and 1.1 percent next year. Earlier, the experts of the Institute had forecast growth of 0.9 percent in 2015 and 1.4 percent next year. As for inflation, KOF has suggested that it will decrease by 0.5 percent next year. In September the Institute predicted 0.2 percent drop.

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