The dollar will fall in the power of the fed and “unclear policy”
In the currency market the basic attention of investors is chained to the us dollar, which continued to decline after the publication of last meeting minutes of the U.S. Federal reserve, who testified that members of the FOMC recognize that after the rate increase at the December meeting of 2018 the Outlook for monetary policy looks less clear.
The phrase that politics is becoming “less clear” is causing a reassessment of expectations of further increases in rate and, hence, revaluation of prospects of the further growth of dollar, which last year was a clear leader among other national currencies.
Causes of insecurity fed into the expediency of further rate hike was not a correction in the stock market of America, and the absence of inflationary pressures, which in reality is below the target of 2%.
But despite the fact that the US dollar fell to all currencies, however, the news is not a shock because it was partially played previously, after comments by Powell at the beginning of this year. Because the current us dollar weakness is likely to be short, and will soon receive correction.
To support the dollar and ensure its medium-term growth can the results of the interim negotiations between the US and China, which until April will try to find a way out of this situation “trade wars”.
Currently, both parties promise to refrain from such unpopular measures as raising taxes on 25%, which is at once very hurt economic growth and market sentiment, but the parties still remain a long-standing unsolved problems, for example, disputes linked to the requirement of China to disclose all information about the technology of manufactured goods, which later are just copied by the Chinese side, and it issues in the foreseeable future is not going anywhere. But reduced worries about a trade war is currently significantly decreased, and this is reflected in the growth of the market.
The S&P500 index slightly adjusted from the levels of the maxima in the district 2594 pips if the market will be able to overcome this resistance in the coming days, the next upside target will be the mark of 2700 in the broad market index. But the opportunity the first time to overcome this mark and to leave above it is trusted poorly.
Let me remind you that during all “loud” events happening “quiet”, but a systematic process – the reduction of the fed’s balance sheet, the withdrawal of dollar liquidity. Since the beginning of 2019. that is just 10 days, this indicator fell by $of 27.66 billion to $4,058 trillion. With the pace already in the spring, we will see a reduction in the fed’s balance sheet below $ 4 trillion, and the last time such figures we saw in 2013-m to year.
“The international financial centre