Today the Fed will make a policy statement at 21:00 GMT+3. This event will affect all the currency pairs with the USD and thus almost the all Forex market!
Surge of revenue of American government bonds to 3% worries investors
Often considered to be a barometer of financial markets, the yield of 10-year American treasuries for the first time since January 2014 has managed to overcome the 3% threshold, although at the beginning of this year it accounted for 2.4%. Investors started worrying because 3% is considered by many as a frontier where negative impact could affect the stock market. Moreover, because of more expensive money, the risk of approaching a recession steps up.
Against the backdrop of soaring revenue of debt markets, the futures for the S&P 500 index lost approximately 0.5% by the middle of the day, as there was a global decline in risk appetite.
Pressure on the cost of American government bonds provoked an increase in the budget deficit, soaring inflationary pressures as well as expectations of tightening monetary policy in America, as some financial experts point out.
March's surge in industrial inflation and also retail sales in the US exceeded forecasts. At the same time, consumer inflation in the United States for the first time since early 2017 exceeded 2%. Acceleration of inflation might urge the Federal Reserve to accelerate its policy tightening. As follows from the quotations in the futures markets, the probability that the number one US financial institution will lift the rate three times in 2018 (in March the rate was already increased by 25 bp to 1.5-1.75%) exceeds 80%. Besides this, investors currently don’t exclude that the major US bank will surpass its own forecasts (two more increases in 2018) and will go to the fourth increase for the year - this likelihood has almost reached 40%. The lift in interest rates, combined with the high American trade deficit, leads to a decrease in bond prices, which raises their profitability.
The NZD rocketed after the Reserve Bank of New Zealand claimed it would end quantitative easing this month. Jump in to know more!
The United States will publish a headline and core inflation rate on July 13, at 15:30 MT time.
Read a short market wrap before trading today!
The United States will publish the non-farm employment change, also known as non-farm payrolls or NFP at 15:30 MT (GMT+3) time on August 6.
Our analyst discusses the latest news and shares his trade ideas on gold, EUR/USD, and S&P 500. Jump in!