Stock markets grow up in a hurry before the fed meeting

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A positive reaction of stock markets gained momentum on Wednesday during the day. As a result, the stock markets of the United States held an impressive rally with the growth of the key indices more than 2%.
The dynamics of the us dollar was less unidirectional. After an initial decrease due to the recovery of demand for risk, the dollar’s attractiveness in the eyes of investors have returned in the focus of market participants returned the monetary policy of the fed. Tonight, at the end of the Federal Reserve System, changes in rates are expected. Rather, we see only hints of improvement in December.
However, the space for the strengthening of the American currency remains: at the moment, the markets provide no more than 80% probability of a rate hike before year-end. Note that this is lower than a month ago. In the case of signals from the fed about its confidence in the economy and a resolute determination against “overheating”, the U.S. dollar is able to return to growth, which was interrupted at the beginning of the month due to election uncertainty.
At the same time, it is impossible to completely rule out surprises. The increased turbulence in the markets last month may well fall into the circle of attention of the Central Bank. Moreover, hawkish comments were one reason for the increased volatility. The phrase was – literally – about the readiness to increase rates above the neutral level.
Recall that in previous years the fed paid attention to the economic situation and the behavior of the stock markets, not only domestically, but also in other regions. For example, on the background of the collapse of oil and “turbulence” in China 2015, has been postponed plans for policy tightening. This attentiveness to the situation this year is significantly less.
The fed raised rates in September, despite the fact that the markets of developing countries fairly “storm”. Preservation determination can result in a new wave of pressure on stock markets and greatly spur the growth of the dollar. This option seems unlikely, but completely to exclude it it is impossible.
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Alexander Kuptsikevich,
Analyst
FxPro