As expected, the result of the meeting of the Bank of Japan brought nothing interesting. The regulator kept interest rates unchanged, while its assessment of the state of the national economy was already expected. The Bank said that amid the impact of coronavirus on economic activity, the state of the economy remains difficult. As for the prospects, it hopes that the country's economy will gradually accelerate as the impact of COVID-19 decreases. The Bank also shows its previously unrealistic hope of accelerating inflationary pressures along with the growth of the country's economy in the second half of the year.
The two-day meeting of the Federal Reserve on monetary policy begins today. As in the case of the Japanese regulator, we do not expect it to become significant. After decisions were taken in February and March, both at a regular meeting of FOMC members and at extraordinary ones, on urgent measures to support the national economy in conditions of the strongest almost simultaneous increase in unemployment and a fall in economic activity due to the negative impact of COVID-19, these are the meetings will not be disastrous. The bank will most likely focus on monitoring the country's economy, without ceasing to closely monitor the external contour - the situation in the world. As in the case of the Central Bank of Japan, the Fed will leave the key interest rate in the range from 0.0% to 0.25%.
Now, in our opinion, the most important thing for investors in making decisions is the process that has started, primarily in Europe - Italy, France, and also in the USA, gradually easing the strictness of the quarantine, which is a factor in increasing demand for company shares and overall demand for risky assets. Earlier, back in March, we believed that April would become a kind of rubicon, as a result of which either a decision to lift quarantine measures would be made or not. Time has shown that our forecast turned out to be correct.
Considering that the most important topic for investors right now is the gradual weakening of quarantine measures, and then their complete abolition, this process will support the demand for risky assets. Against this background, the US dollar, which was previously supported as a safe haven currency, as a global reserve currency, will unambiguously weaken as investors in risky assets leave the cache. Why this is so, because during the coronavirus pandemic situation, it was the dollar that was being bought, as well as US Treasury bonds as safe havens.
We are confident that the weakening of the dollar will only strengthen in May. Therefore, we consider it possible to recommend stocks of companies, oil contracts, and, of course, commodity and raw materials for purchases.
Forecast of the day:
The AUD/USD pair fully implemented the pattern of the continuation of the downtrend flag trend. We believe that it has prospects for further growth to the level of 0.6540, while it holds above the level of 0.6445.
