The US stock market has completed a two-month rally
Markets remain under moderate pressure, despite the comments of the head of the FOMC. Semi-annual speech to Congress, Powell’s heightened expectations that the Reserve System is ready to be more patient the face of a slowing economy and pushed the dollar.
As a result, at the end of yesterday’s session, the USDX fell to three-week low, and the EURUSD crossed the 1.1400 mark. Especially notable was the strengthening of the British pound, which, paired against the dollar, rose to 1.3280, to the highs of September, receiving additional recharge due to speculation around the possible postponement of the date of Brexit.
However, you should note that to continue the growth of the stock markets alone is not sufficient softness of the Federal reserve. At the end of the session, key indices reversed lower, while the S&P500 and all came in the area of the lows of the beginning of the week, quickly recouping the initial optimism.
Dynamics of markets makes us cautious. We see that the sale of shares increase towards the end of the auction. Most likely, it reflects the actions of professionals who carefully took profits after a two-month rally. At the end of last year we have seen similar dynamics when the stock rapidly sold off at the end of the day, and all this eventually resulted in the worst for the American indexes the end of the year, and for many decades.
As for the dollar, the demand for it has grown along with the pressure on the stock. To date, the EURUSD is losing 0.3% to trade at 1.1370. However, the Japanese yen is gaining strength, including the dollar, reflecting the increased demand for defensive assets amid the growing concern of market participants. In addition to the traction to safety, the dollar strengthens confidence that other major Central banks will also soften its rhetoric behind the fed.
At the moment it is too early to talk about the risks of a large-scale sell-off in stock markets. A more pragmatic approach shows that we are dealing with the desire of players to fix profit after a two-month rally, which occurred in spite of increasing signs of a slowing economy.