FX.co ★ Powell's report at the US Senate Banking Committee will drive the markets (Expect AUD/USD to resume growth and USD/CAD to decline)

World markets ended the week with a fall in stock indices, weakening the price of commodity assets and limiting the growth of dollar. All this happened because of extremely high volatility.

Another reason is the revised expectations of rate hike in the United States, that is, an immediate increase of 0.75%, not by 0.50%. The Swiss National Bank also raised the discount rate for the first time in many years, making the investor realize that the process of raising rates will be sustainable and long-term. Only the stabilization of inflationary pressure both in Europe and in the States will stop it.

Monetary authorities in Western countries are already trying to solve the problems in their economies, especially the persistent sharp rise in prices caused by recent sanctions. But European and American leaders, for political reasons, do not want to acknowledge this, worsening the overall situation.

The tone of markets this week will depend on the speech of Fed Chairman Jerome Powell at the US Senate Banking Committee. Much will rely on what he will say about inflation, as well as measures to contain it and the general situation in the US economy. Any words that will hint that a tight monetary policy will continue until inflation is completely defeated can definitely cause a new wave of sell-offs in the stock markets and an increase in dollar.

But if Powell repeats what he said last week following the Fed's monetary policy meeting, that is, the rates will not rise immediately by 0.75%, but may be less or even stop amid the stabilization of inflation, the dollar will weaken, while other currencies, such as euro, will rise. In any case, it is important to monitor the dynamics of US Treasury yields as it will signal the next movements of the market.

Forecasts for today:

AUD/USD

The pair found support at 0.6900. Continued positive market sentiment and Powell's softer stance on the Banking Committee could prompt the pair to rise to 0.7060.

USD/CAD

The pair faced an obstacle at 1.3060 and rebounded from this level. Rising oil prices and possible increase in risk appetite will encourage the pair to fall to 1.2975, then to 1.2860.