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Pending interest rate cuts


28 April 2020

In most countries, they continue to discuss steps to phase out quarantine, while at the same time talking about the difficulties for the rapid recovery of the global economy. So, during today's speech, the head of the Bank of Japan announced that the monetary policy will be adaptive and, as a result, the regulator can quickly and without hesitation implement easing policies. In this case, we are talking about the fact that the interest rates of the Bank of Japan may decrease as the rapidly increasing volumes of bond purchases.

The expansion of the quantitative easing policy in the form of active bond repurchases supports Japanese stock indices. At the same time, JPY's trading activity remains moderate, once again indicating a clear market uncertainty.

Goldman Sachs analysts say there is the prospect of a further reduction in the Fed's main interest rate. According to their forecast, in June we will see a decrease of 0.5%. Let me remind you that this week the Fed will hold a meeting on interest rates and monetary policy in general. As a result, the appearance of any information about the regulator’s readiness to make changes to the current policy will be accompanied by a surge in US dollar trading activity.

I will draw your attention to the moderate volatility for trading in the US dollar paired with most currencies. In addition, with the opening of the American trading session, the situation is unlikely to change very much due to the lack of news to hit the market. Also, on Tuesday, the economic calendar will be virtually empty. Only a report on changes in consumer confidence in the United States will be able to influence investor sentiment - the forecast is pessimistic.

Now let's move on to the oil market. After an abnormal collapse last week, all traders and investors are closely watching the oil price. During the Asian trading session, the price of oil declined markedly. But by the opening of markets in the United States, the situation had stabilized somewhat. Nevertheless, there is still no reason for obvious optimism, as a result, active purchases remain a substantial risk.

The nearest strong technical level of support remains around the mark of $15 per barrel of US-grade WTI oil.

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