Global markets continue to be in a fever amid a lack of full clarity of the expected actions of the Fed aimed to support the national economy. In addition, another disruption of the US-China negotiation process by the US Department of Commerce, which has blacklisted new companies from China, also does not please investors.
In his speech on Tuesday, Fed Chairman J. Powell asked the markets not to confuse the current measures taken to increase reserves with quantitative easing (QE), which is rumored about in world markets. In addition, the chairman of the Federal Reserve said that this was just a "technical issue" and nothing more. Yes, in his commentary, he said that there are external risks to the American economy, but not so much as to take drastic measures. In his opinion, the time has come to expand the balance in order to maintain an appropriate level of reserves. What was still important in his words was the statement that the Federal Reserve would not strive for negative interest rates and, in general, in his opinion, the current easing of conditions is similar to the situation that the regulator took in the mid-90s of the last century.
Against such a background, which Powell left behind, who somewhat disappointed the markets, who were expecting, if not a direct copy of the situation in the early 10s, the era of QE, then similar financial conditions, investors bought protective assets on Tuesday, although it should be recognized that the dynamics of these action was still not so significant.
Moreover, the market received another signal about the duality of the position of the Fed during a speech by Fed member C. Evans. On the one hand, he announced that he continues to expect economic growth next year at 2.0%, and on the other, he noted the weakness of business investments to shift risks upwards and the need for a slightly more noticeable impulse.
It seems that financial markets, following the results of Powell and Evans' speeches, as well as amid news of the failure of the next meeting of representatives of China and the United States on trade, decided to take a break and watch how new measures to support the US economy will be implemented. This scenario will contribute to increased volatility and chaos in the markets, as investors will nervously respond to economic statistics from the United States, as well as any news on the subject of US-Chinese trade negotiations.
Today, the focus of the market will be the publication of the minutes of the September meeting of the Fed, but in our opinion, it will not have a noticeable effect on investor sentiment, unless, of course, it reveals some hidden points in the expected new course of the Fed.
Forecast of the day:
EUR/USD is consolidating above the level of 109.50 amid a lack of a clear picture of investors on future Fed stimulus measures. As long as this problem exists, the pair will remain under pressure. Lowering the price below 1.0950 may lead to its limited decline to 1.0880.
GBP/USD pair froze above the level of 1.2200 in anticipation of the latest Brexit news. The continuing risk of Britain leaving the EU without a deal will cause a new fall in the sterling rate. From a technical point of view, a decline in the pair below the level of 1.2200 may become the basis for its local decline to 1.2100.