The topic of the pandemic is still in the focus of the markets, but it no longer plays a major role, and is perceived by investors as a certain addition to the negative news. In this case, market players are beginning to put all their attention on the Fed's final decision on monetary policy, which will be known from the results of the meeting that starts today.
What do financial markets expect from the Fed? Will there be any surprises from the world's largest regulator or will we learn nothing new?
We believe that the Fed will not change the parameters of its monetary policy, since there are no reasons for this so far. Moreover, the members of the Central Bank, including its leader J. Powell, have repeatedly stated that there is no reason to worry about changes in the monetary exchange rate. On the contrary, they actively convinced the markets that this would not happen for at least another year. We believe that nothing new will be reported in this sense as a result of this meeting.
So, what can Powell focus on at the press conference? We believe that he will note that the inflation growth is present, but has not yet turned out to be explosive, as it was expected earlier. Thus, its rise turned out to be, if not moderate, then not critical. In this regard, Treasury yields made a downward correction, representing a decline in the degree of tension in the debt market, which has a beneficial effect on the demand for company shares.
In general, we believe that this meeting of the US regulator will be ignored by the markets, so all attention will be paid to the publication of updated economic statistics and corporate reports of companies such as Alphabet, Microsoft, Starbucks and AMD, which will report after the market closes. From European companies, BP, UBS, ABB, Schneider Electric, Novartis and Whitbread will report.
Considering the continuing positive mood on the markets, we believe that the demand for company shares will persist, which will push up stock indices, primarily American ones. If so, the US dollar will remain under pressure, as it still remains a captive of the broadest stimulus measures, which turned it into a funding currency.
In terms of statistics data, the presented values of the consumer confidence index from the CB and the index of manufacturing activity from the Richmond Fed will be interesting today.
Forecast of the day:
The EUR/USD pair remains in a short-term upward trend and corrects down again after reaching the first target of 1.2115. We believe that it will turn up again and rush to 1.2115 after a pullback to the level of 1.2050.
The AUD/USD pair pulled back down after reaching its target of 0.7800 and so, it is likely to further decline to 0.7765. Around this level, we believe that it is necessary to buy with the target levels of 0.7800 and then 0.7830.
