Analysts at Goldman Sachs said on Monday that the Fed will raise rates by 0.75%, not by 0.50% as previously predicted. This led to a collapse in the US stock market, which reverberated in Europe and other trading floors. The dynamic continued on Tuesday, but with noticeably less intensity, at least in America, as Europe reported the latest inflation data in Germany, which showed continued growth in consumer prices in annual terms, from 7.8% to 8.7%, and a monthly increase in May by 0.9%. The data prompted the ECB to announce an urgent unscheduled monetary policy meeting, especially since the yield of government bonds shot up sharply.
Going back to the US, it seems that markets have already taken into account a 0.75% rate hike, so if the Fed does not live up to expectations and raise the rate by 0.50%, the stock market will increase sharply. This will spread to other regions and markets, and the dollar will see strong pressure, which will result in the ICE dollar index declining to 103.00 points. But if the rate is raised by 0.75% and the Fed announces a similar increase in the future, stock markets will fall along with commodities. Dollar will continue to rally, and the ICE index will climb to 105.00 points.
A third option is also possible - this is when the rate will be raised by 0.75%, but Powell's statement will be soft without any forecasts of further aggressive rate increases. In this case, there will be a local increase in stock indices and a weakening in dollar.
Forecasts for today:
EUR/USD
The pair is higher trading in the wake of the news about the emergency meeting of the ECB. Overcoming the price and consolidating above 1.0500 will lead to the growth of the pair to 1.0600, while the absence of a significant outcome of the ECB meeting and tough stance of the Fed on monetary policy will put pressure on the pair, pushing it to 1.0400 and 1.0355.
XAU/USD
Spot gold is rising, thanks to the positive dynamics in the stock markets and hopes among investors that after the Fed rate increase, Powell's statement will not be so aggressive in the issue of further rate hikes. With this scenario, the pair may rise to 1869.00 after overcoming 1827.70.
