The Fed’s meeting has finally taken place. The regulator has been keeping the key rate near zero and printing money for almost a year and a half. However, at yesterday's meeting, it made hints about the upcoming changes. The Fed intends to reduce the QE program in the near future. In total, the central bank has injected almost $4 trillion into the economy since the beginning of the pandemic. Naturally, these money injections have a huge impact on the economy. Let’s discuss what happened in the Asian session.
The US dollar gained momentum following the results of the Fed’s meeting. In just a couple of hours, it rose to 93.5. However, it has recently entered the correctional phase, declining to 93.20. In general, the US currency is expected to grow. Its next target is the level of 93.50-93.70.
Following the Fed’s meeting results, the greenback managed to add gains as well as the key stock indices and the dollar/yen pair. Moreover, the pair showed an increase of 0.53% or 54 pips. On the chart, the price keeps growing, approaching the level of 109.98. However, it may tumble as the correction in the stock market is still not over. Today, Evergrande is expected to declare insolvency. Now, the company is trying to restructure its debts. China’s central bank predicts the bankruptcy of several more companies. Yet, it refused to rescue them as it may undermine other markets. Institutional investors refrain from entering the US stock market as they are awaiting its fall by 10-20%. So, the dollar/yen pair is highly likely to decline to the level of 109.40 and even below quite soon.
Yesterday, the Australian dollar gained 18 pips. This morning, it slid down. The downward movement takes place below the indicator line. One of the key oscillators is also in the negative zone. If the price fixes below the level of 0.7223, the low logged on August 27, it may well slip to 0.7065. Nevertheless, its future trajectory will depend on foreign markets. The price is likely to rebound before reaching the indicated level.
The Fed kept the parameters of its monetary policy unchanged. As widely anticipated, the regulator did not announce the tapering of asset purchases. Yet, Fed Chairman Jerome Powell hinted that soon the Fed may slow down bond purchases. Fed policymakers project the bond-buying taper to end in 2022. The regulator also said that interest rate increases may follow more quickly than expected.
