The results of the Fed's April meeting slightly reassured investors, since the regulator and its Chairman J. Powell did not give any specific signals about when the changes in monetary policy will start. But on Monday, some members of the Fed discussed that significant changes towards improving the state of the US economies will lead to the beginning of a decline in asset purchases, which brought financial markets to reality once again.
Yesterday, Powell was optimistic in his comments on the national economy. He talked a lot about the labor market situation and the ongoing difficulties in the economic recovery process. In general, there was nothing special, but among the speakers, Fed Member and Richmond Fed Chairman T. Barkin reminded the markets again that noticeable improvements in the dynamics of the recovery, and then the growth of the American economy, will definitely lead to the beginning of the process of reducing bond buybacks by the regulator with all the consequences already emerging. Although such statements are not new, they force long-term investors to be cautious.
Currently, the stock markets are experiencing a period of consolidation of stock indices, which is associated with the end of the positive impact of the previously supportive markets of the new large-scale stimulus measures in the United States and the regular statements of the Fed representatives that we should not expect changes in the monetary rate of the regulator. In addition, the actual end of the corporate reporting season does not give the markets new signals for buying shares of companies. Amid the absence of new positive news, primarily economic data and the growth of traditional caution before the summer holidays, the markets are already experiencing a multi-day period of consolidation of stock indexes, which is likely to continue this week.
As for the situation in the currency markets, it continues to be boring. After rebounding last Friday, the ICE dollar index shows dynamics in a quite narrow range from 90.50 points to 91.50 points. This is due to the fact that most of the major currency pairs in this basket are showing sideways dynamics, with the exception of the Canadian dollar, which rebounded against the dollar on the back of a recovery in crude oil prices, which sharply returned to the levels of the beginning of last year.
In general, we continue to expect sideways dynamics in the currency market, stock markets and the commodity market. This will continue until investors are either convinced that the global economy will receive a new impulse for growth in the wake of curbing the consequences of the COVID-19 pandemic, which will turn out to be a new wave of company stock purchases, or an increase in US inflation will finally convince investors that the fact that the growth potential of the local stock market has already been used up, and the beginning of a change in the course of monetary policy is approaching.
Forecast of the day:
The EUR/USD pair found support at the level of 1.2015. The breakdown of which will allow the pair to rush to 1.2140.
Gold is consolidating in the range of 1765.00-1797.55. We believe that the sideways dynamics of the yield of US Treasuries and the lack of positive news for the US dollar will further push gold's price upwards. The breakdown of the level of 1797.55 will lead to a price growth to 1821.00.