The world markets overwhelmingly ended the week in a positive zone, supported by the tone and content of the speech of the Fed's head, J. Powell at an online symposium in Jackson Hole, USA.
As expected, the Fed Chairman announced the bank's decision to begin the process of reducing the purchase of government bonds, but at the same time, he assured the financial markets that this does not mean a transition to an increase in interest rates.
"The timing and pace of the upcoming reduction in asset purchases will not serve as a direct signal regarding the timing of an interest rate hike, for which we have formulated a different and significantly stricter test," Powell said.
Actually, it can be said that the regulator, starting to reduce the volume of asset repurchases, and these are government Treasury bonds and corporate mortgage securities with a total volume of about $ 120 billion, will only reduce the volume of money printing or reducing the dollar supply in the financial system. At the same time, the policy itself will remain soft, although not critically super-soft.
The markets reacted to this news with a surge in demand for risky assets. American company shares surged in price, and the S&P and Nasdaq stock indexes updated the local highs again. Crude oil prices resumed their growth, and the US dollar on the currency market was expected to be under pressure.
As noted by Powell, the main condition of a soft monetary policy remains the recovery of the labor market. Therefore, we believe that now all investors' attention will be focused not on inflation, but on how things will be with employment. If the positive dynamics of July suddenly continues, when the number of new jobs soared above 900,000, it will significantly bring the timing of the start of the process of raising interest rates, and in this case, we will really see the beginning of a decline in interest in risky assets and the strengthening of the dollar in the wake of an increase in the yield of treasuries. In the meantime, their dynamics clearly demonstrate a decline in the expectation of a rate increase in the near future.
With regard to today's possible movements in the markets, we believe that the rally in the stock markets that began last week is likely to continue. The US dollar will remain under pressure, and commodity assets will generally receive support.
Forecast of the day:
The EUR/USD pair is weakly making a downward correction. Its growth above the level of 1.1800 will push the price up to 1.1850.
The XAU/USD pair is slightly correcting downward after a strong growth on Friday. The price holding above the level of 1810.00 amid strengthened demand for risky assets will push the price up to 1830.00
