The dollar: the fed regained confidence in the U.S. currency
Representatives of the Federal Reserve System yesterday at the meeting said they did not see the need to change the direction of monetary policy – in either direction – in the short term. Moreover, the comments continued confidence in economic Outlook and rising inflation. These contradictory sentiments have caused a jump in the dollar by 0.6% and took away more than 1% of the S&P500.
On Thursday morning, the futures on American indexes are carefully restored, laying quotes in yesterday’s optimism of the regulator in relation to the national economy.
For the dollar and debt markets are not so simple, and enough space to maneuver. The participants were assured that they can expect at least one rate reduction in the next 12 months. Their hope, apparently, is not justified (though not the fact), and they are now preparing a major shift in the overall emotional trend on USD. This approach fed is able to increase the yield of long-term bonds and increase purchases of U.S. currency.
Another important point – the confrontation between trump and the fed. As expected, on the eve of the meeting, the President noted that the economy can “fly like a rocket” when the rate reduction and quantitative easing. He noted that in this case, “the national debt will look small.” This is possible only with the devaluation of the dollar, which will seriously damage financial stability.
Therefore, the “patience” of the fed in this case is seen as a stoic calm, is able to maintain confidence in the national currency, which have been declining since the end of last week.
The stock market
The S&P500 by the end of trading on Wednesday fell by 1.5% from historic highs, recouping all typed increase. Thursday morning marked by careful purchases of shares, and such wait-and-see attitude may be maintained until the release tomorrow of statistics on the labor market. Meanwhile, published since the beginning of the week data paint a contradictory picture. We have seen a strong increase of 275 thousand jobs (according to ADP), against the Euro 181 thousand, while the fall in manufacturing ISM from 55 to 52.8, at least two and a half years.
“Patient” stance the fed stunted EURUSD steps away from the 50-day mA, returning it for some time under the 1.1200 level. On Thursday morning, the pair is showing attempts of growth, rising to 1.1210. Traders should remain cautious as there is still a number of important data that could affect the course of trading on the foreign exchange market. FxPro analysts recommend to pay special attention to the rate decision of the Bank of England and statistics on the US labor market.
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