The reaction of the markets to the published economic statistics from the United States fully shows investors' current priorities.
Based on the presented data, US consumer inflation continued to decline for the third consecutive month. The market reaction to these figures should have been quite clear – an increase in demand for company shares and a sharp decline in the US dollar. However, this did not happen. Investors responded to the released values of an important macroeconomic indicator with rather sluggish purchases of shares and the sale of the dollar, but after a while, everything returned to normal. Stock indices, not only in America, but also in the world as a whole, came under pressure again from sales, while the US dollar received not very noticeable support.
The market behavior fully indicates that any noticeable movements should not be expected before the Fed's final decision on monetary policy, and the meeting of the regulator will be held on September 21-22. This is due to the fact that the regulator's decision to start reducing the volume of asset repurchases – government bonds and corporate mortgage securities, as well as possible coverage of the likely timing of the start of the process of raising interest rates, will significantly change the entire landscape of global financial markets, which have been completely relying on the unlimited dollar liquidity since the beginning of the COVID-19 pandemic last year, and this has pushed stock indices to new and new heights for the last year and a half.
A clear confirmation of the mood of investors is their reaction to the publication of consumer inflation data in the UK today, the values of which have soared to new heights. Trading participants responded to this news only with a weak increase in the pound exchange rate against the dollar, and that's all.
Assessing everything that happens on the markets, we expect that volatility will only increase on Friday amid a decline in trading volumes due to the rational desire of most investors to step aside and wait for which direction in monetary policy for the next year or two the Fed will choose.
Forecast of the day:
The AUD/USD pair remains under pressure amid the publication of disappointing statistics from China, with which Australia is in close economic contact. The obvious withdrawal of investors from risk, as well as the slowdown in China's economy, will push the pair down to the level of 0.7265 after breaking through 0.7310.
The USD/JPY pair is consolidating above the level of 109.50. The continued withdrawal of investors from risky play may allow the pair to fall below this level and further down to the level of 108.80.