Before choosing an investment strategy, many analysts recommend pricing in the political factors.
The Federal Reserve has already determined the course of the monetary policy for the next 12 months. The regulator will maintain its dovish stance as well as continue to inject money into the economy to shore up a tottering financial system. What is more, financial watchdogs of other countries will follow a similar strategy. Analysts note that the correlation between financial instruments and monetary policy has been tightening recently.
According to the results of the Fed meeting, March turned out to be a landmark month in the US. For instance, key financial decisions designed to determine the monetary policy course for the next months or until the end of this year have been made through March. The FOMC meeting was held on March 16-17 and ended with a testimony of Fed Chairman Jerome Powell, who brought up several important questions.
The US economy is recovering from the corona crisis at a faster pace than previously predicted. However, despite such a positive fundamental background, the regulator intends to maintain a soft approach to monetary policy for some time. According to Powell, the main reason to keep the dovish stance is the employment situation in the country. The total number of jobs in the US economy remains 9.5 million below the pre-crisis level. Nevertheless, the employment level has improved significantly on the back of growing economic activity.
The Fed and the US government were trying to convince large investors that the economic, as well as epidemiological situation in the country, was under control and a sharp economic downfall was highly unlikely. Besides, investors were assured that the central bank would intervene and help the economy if needed. Thus, such positive rhetoric of the US authorities and the adoption of the stimulus measures have attracted investors and inflows of money. Kirill Vikhlyantsev, a member of the Board of Directors at Vax Capital AG, is sure that the US authorities did an excellent job using highly effective methods to save the economy and its prestige. Few people would disagree with Vikhlyantsev's opinion as indeed not many countries today can boast of such a wise strategy of attracting disdained investors back.
Thanks to the Fed's monetary policy strategy and a smashing $1.9 trillion relief package the US dollar is likely to keep the world's reserve currency status in the coming years. However, when planning the trading strategy, the expert recommends that investors still closely monitor the speeches of Joe Biden as the continuation of protectionist policy may also have an adverse impact on the greenback.
