Fed Chairman J. Powell did not change his earlier rhetoric presented in the press when speaking in Congress on Tuesday. The main point of his speech was the statement that the regulator is confident that the growth of inflation will stop and it will eventually return to acceptable levels, which means that there is no reason to raise interest rates in advance.
Markets reacted to the words of the head of the world's largest central bank with the growth of stock indices, increase in the value of commodity assets, as well as the weakening of the US dollar. On this wave, the yield of interest-rate-sensitive 2-year Treasuries also adjusted.
Following the important speech, the question arises: Will the price continues to rise after a downward correction or not?
This is very likely, albeit limited. Investors will continue to monitor the dynamics of US inflation.
Today, markets' attention will be drawn to the publication of business activity indices in the manufacturing and services sectors of the EU, Germany, Britain, and the US. It is expected that these indicators will rise in Germany, but will show a decline in Britain and the United States. As for the Eurozone, the index of business activity in the manufacturing sector will fall, but the value of the index of business activity in the service sector will grow.
As before, we should also consider that the figures from the United States will be given special attention, which is associated with the importance of the US economy in the world and its broad influence. We believe that the demand for stocks, which is still indicated by index futures in Europe and the United States, will continue. This is despite the possibly weak values of the American indicators. In this situation, the US dollar will be under pressure against all major currencies.
Forecast of the day:
The EUR/USD pair is trading above the level of 1.1900. The optimism from Powell's speech supports the demand for company shares and in general to the risky game of investors in the markets. We consider it possible to buy the pair after it rises above the level of 1.1945 with a possible target of 1.2000.
The USD/CAD pair is consolidating slightly above the level of 1.2300. The growth in oil prices, and the increase in demand for risky assets after Powell's speech in Congress, will put pressure on the pair. We consider it possible to sell it after it declines below this level with targets at 1.2265 and 1.2200.
