FXTM information and reviews
FXTM
93%
IronFX information and reviews
IronFX
92%
Libertex information and reviews
Libertex
91%
FXCC information and reviews
FXCC
90%
Markets.com information and reviews
Markets.com
89%
FxPro information and reviews
FxPro
88%
EUR/USD
1.1732
BTC/USD
41 945.61
GBP/USD
1.3642
USD/JPY
109.5096
USD/CHF
0.9221
USD/CAD
1.2776
EUR/JPY
128.4711

FOMC: policymakers may keep their cards close to their chest


28 April 2021

The Fed’s policymaking arm will conclude its two-day policy review on Wednesday, with the announcement and the press conference expected to hit the headlines at 18:00 GMT and 18:30 GMT respectively. There are rumours that bond tapering talks may wrap up, but board members will probably keep the cards close to their chest and maintain the same guidance even if Q1 GDP growth figures due on Thursday and core PCE inflation data on Friday surge. If the Bank hints at tapering in advance, the dollar may find new buyers, though such an action may come at a later stage.

The shining US economy

The Bank of Canada was the first among major central banks to plot its policy normalization route last week as it praised a warmer-than-expected economic recovery, cutting the pace of its bond purchases and bringing forward the timetable for a potential rate increase. Although investors have been expecting the BoC to be more aggressive in scaling back its massive stimulus than the Fed given the fact that Canada has recouped a larger share of its labor slack than the US, the event raised questions about the Fed’s stance.

Compared to Canada, the US has a brighter outlook and is expected to return to normality sooner, as its vaccination program runs without interruptions. Notably, the preliminary GDP growth figure is expected to spike from 4.3% to 6.1% (annualized) in the first three months of the year.

The Fed’s closely watched core PCE inflation index may not surpass the 2.0% threshold in March, but a potential upturn from 1.4% y/y to 1.8% would still be significant on Friday.The personal income and consumption figures accompanying the inflation report could add to the cheerful numbers. The former may have impressively experienced a double-digit expansion of 20.1% m/m in March thanks to the latest stimulus checks provided by the government, while the latter is forecast to rise at a softer but robust pace of 4.3% m/m from -1.0 previously.

Ignore what the Bank of Canada just did

Despite the BoC’s recent moves and the latest bang in Nonfarm payrolls in April, the Fed will probably stay on course, leaving interest rates within the record low range of 0-0.25% and its monthly bond purchases at $120 billion on Wednesday. The Bank has even managed to calm the persisting inflation fear factor as reflected by the down-trending 10-year Treasury yield, attributing the growth in prices to transitory factors. Therefore, any words of tightening at this meeting would downgrade its credibility and trigger another rally in yields.

Press conference could move the dollar

The press conference, however, may not be easy for Fed chair Jerome Powell as he is likely to receive a barrage of questions aimed at re-examining plans of bond tightening this year following the Bank of Canada’s initiative. If Powell cannot resist, unveiling some positive thinking about unwinding bond purchases earlier than previously thought, the dollar could accelerate, likely sending dollar/yen up to 109.00 and near the 20-day simple moving average (SMA). Beyond that, the door would open for the 109.70 resistance area.

Speaking in an interview broadcast a few weeks ago, Powell admitted the outlook has improved significantly, but substantial risks continue to linger in the background. Hence, although more optimistic language cannot be excluded given the continuous economic progress, he is largely expected to stick to the script, reiterating that interest rates will not rise before 2024 and the pace of bond purchases will remain steady until recovery reaches a sustainable path and full employment conditions dominate.

Perhaps June’s meeting, which will include new economic projections,will be a better time to prepare markets for any bond tapering actions or at least create some flexibility if economic data move beyond the central bank’s forecasts next month. Apparently, the Fed aims to achieve a smooth transition to the tightening phase. So, it will likely avoid any surprises this week. That said, given the striking economic improvement, the more patient the Fed holds, the larger the odds become for a sudden telegraph and a sharp bounce in the dollar.

In the event the Bank uses a more cautious tone than analysts anticipate, underlining the importance of an easing monetary policy and calling any stimulus withdrawal plans premature, dollar/yen could drift lower to test the bottom of the ascending channel and the key support region around 107.76, a break of which is expected to spark a more aggressive decline towards the 106.65 barrier.

#source

Related

Stock Futures Trade Sharply Lower
Stock Futures Trade Sharply Lower

Futures in the United States and in Europe are trading sharply lower as investors worry about the domino effect of Evergrande’s massive plunge on the Chinese property market..

21 Sep 2021

Oil market: the unbalanced demand and supply
Oil market: the unbalanced demand and supply

Oil prices climbed to higher grounds in the most recent daily sessions adding further to its upward momentum formed so far in September. The Oil market is running...

21 Sep 2021

US Markets lost major support, Asian Indices are melting
US Markets lost major support, Asian Indices are melting

Global markets closed last week on the back foot, and no significant positive factors emerged in Asian trading, increasing the flight to safety. The Hang Seng lost...

20 Sep 2021

US Retail sales and other data has supported Dollar
US Retail sales and other data has supported Dollar

The US Retail sales notably exceeded expectations, adding 0.7% in August vs an expected 0.7% decline. The increase to August last year is an impressive 14.9%...

17 Sep 2021

Geopolitics Fire Up Up and Cryptos Are Booming
Geopolitics Fire Up Up and Cryptos Are Booming

Futures in the United States and Europe are trading lower today as investors are worried about the new security agreement between the U.S., the U.K. and Australia...

16 Sep 2021

UK inflation surges, stocks struggle
UK inflation surges, stocks struggle

European markets flat at the open this morning as UK inflation surged to a record high in August and Chinese economic data was soft. China’s retail sales fell to...

15 Sep 2021


Editors' Picks

OctaFX information and reviews
OctaFX
86%
HotForex information and reviews
HotForex
85%
XM information and reviews
XM
80%
FXCM information and reviews
FXCM
79%
Vantage FX information and reviews
Vantage FX
78%
Moneta Markets information and reviews
Moneta Markets
77%

© 2006-2021 Forex-Ratings.com

The usage of this website constitutes acceptance of the following legal information.
Any contracts of financial instruments offered to conclude bear high risks and may result in the full loss of the deposited funds. Prior to making transactions one should get acquainted with the risks to which they relate. All the information featured on the website (reviews, brokers' news, comments, analysis, quotes, forecasts or other information materials provided by Forex Ratings, as well as information provided by the partners), including graphical information about the forex companies, brokers and dealing desks, is intended solely for informational purposes, is not a means of advertising them, and doesn't imply direct instructions for investing. Forex Ratings shall not be liable for any loss, including unlimited loss of funds, which may arise directly or indirectly from the usage of this information. The editorial staff of the website does not bear any responsibility whatsoever for the content of the comments or reviews made by the site users about the forex companies. The entire responsibility for the contents rests with the commentators. Reprint of the materials is available only with the permission of the editorial staff.
We use cookies to improve your experience and to make your stay with us more comfortable. By using Forex-Ratings.com website you agree to the cookies policy.