FX.co - Hopes for the end of the correction and start of a bull market continues

2023-08-22T08:10:58

Relevance until2023-08-24

Hopes for the end of the correction and start of a bull market continues

As markets worry about the future of monetary policy, activity declined noticeably. Investors will likely listen to the speech of Fed Chairman Jerome Powell at the upcoming economic symposium in Jackson Hole to understand once again the course of the Fed's policy until the end of the year.

First and foremost, market players want to hear clear and unequivocal words about whether the Fed will stop at another previously announced interest rate hike of 0.25% or not, considering the overall picture in both the global and US economy. It can be said that the decade of low inflation and not high-interest rates already ended, so Powell's statement may answer whether the Fed views an inflation rate of 3% in this challenging economic situation as bad or not.

The result will directly affect the cost of money and demand for company stocks. After all, the yield of benchmark 10-year government bonds firmly holds above 4%.

In terms of dollar, movement stalled as the ICE index could not overcome 104 points. It currently stands at 103.13 points, showing a local reversal.

Gold also turned around, breaking through $1900.00 per troy ounce. It will continue to grow if Powell dispels at least some of the uncertainty about the future of monetary policy.

However, the Fed chief may just repeat his earlier words, citing the risks of high inflation, the stable labor market, and about how the US economy as a whole cope with challenges. If this happens, uncertainty will persist in markets until the release of fresh data on the labor market and consumer inflation. In that case, only the worsening of the unemployment situation and a resumption of inflation decline will push the Fed to finally end its rate hike cycle, which will hit dollar and become a huge incentive for growth of stocks and a downward reversal of Treasury yields.

Forecasts for today:

Hopes for the end of the correction and start of a bull market continues