Thursday was a day of disappointment. This is how the expected speech from Powell turned out to be completely unspecific and greatly upset investors. It is not clear whether the turmoil in the markets will start or whether investors will buy again.
How much investors wanted to hear specifics from the US Federal Reserve to decide what to do next in the markets, but no luck. All we heard was the US Federal Reserve’s strong position in terms of maintaining an adaptive monetary policy, its belief in economic recovery, and some revision of the US unemployment forecast as well as economic growth.
These statements have turned out to be completely unhelpful for investors, resulting in a sale of S&P500 futures throughout Thursday. There were many different statements at the conference which will indirectly affect the market. The Fed is waiting for further financial stimulus, which is not available. There is no way Republicans and Democrats can agree on what kind of stimulus it will be in form and volume.
In the near future, analysts will analyse Powell’s speech in detail and draw certain conclusions about what he wanted to say and what the US Federal Reserve will do.
The US Federal Reserve expects inflation to rise to 1.7% this year and rates to remain at the same level for a long time, until 2024. Given these figures, it can be assumed that the US will already have a real negative interest rate of 1.3%-1.5%. This is a negative signal for the dollar, so in this situation investors will buy high-yielding assets and currencies that are more stable. In the current situation, the Euro looks attractive and we can consider buying from 1.1750 with further growth to 1.1850 and further to 1.20.
Oil continues its growth for the fifth consecutive trading session. The falling US dollar is setting the pace, but there are some signs of price reversal from current positions. Recently we have seen a negative oil price and it has risen to $40 per barrel, which is very significant. The Coronavirus is beginning to rage in Europe, which could in turn affect the economic recovery. A correction to $36 per barrel can well be expected in the current situation.
What awaits us today?
08.00 UK retail sales volume for August.
14.30 Basic retail sales index in Canada for July
16.00 Consumer sentiment index from the University of Michigan in the USA for September
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