The mid-term elections in the US continue to have a strong impact on global financial markets. The main reason is its ability to change the way authorities look at economic policy, which will have a noticeable impact on the Fed's rate decisions.
Most likely, a cut in financial costs will have an impact on inflationary pressure, meaning that its slow down and decrease will signal the easing of rate hikes and possibly, the end of the measure.
Markets are now anticipating the outcome of the election, as well as the inflation data scheduled to be released on Thursday. CPI is expected to grow by 0.6% m/m, but drop to 8.0% y/y.
The end of rate increases will lead to the formation of bottom in stock and government bond markets in the US, but will also return risk appetite. This means that the sell-offs in Treasuries will stop, and after a certain period of consolidation, will begin to show an increase. The global growth of dollar will also stop.
But for today, trading will open negatively during the European session, which will allow dollar to receive local support. The main volume, however, will be set during the US session.
Forecasts for today:
GBP/USD
The pair is consolidating below 1570. A correction in stock markets ahead of the mid-tem election results in the US, as well as the incoming inflation data and possible slide of the UK into recession, may lead to the weakening of pound.
Although the market will be driven by expectations of a softer Fed policy, changes in the composition of the Congress may cause a continued decline in dollar, which will outweigh all the negative in pound. This means that the pair may rise to 1.1770 after overcoming 1.1570.
AUD/USD
The pair is trading below the resistance level of 0.6540. If stock rally continues, quotes will increase to 0.6650.
