The Fed is ready to start tapering in November. Since the markets were expecting this and it wasn’t a surprise, the USD slumped allowing risk-on currencies and gold to rally up.
USD and S&P: feeding back to Jerome Powell
Generally speaking, Jerome Powell’s announcement was bringing a message of cautious optimism. He recognized that recovery will take some time and that the current situation in the US is far from pushing into the hawkish direction. The interest rate is held steady at 0.25% and will stay there in the nearest future. He also noted that even after a strong period of job creation in the course of recovery there still will be a big chunk of people who wouldn’t get back to work. Hence, getting inflation back above 1.5% will take quite some time. Fed’s Chair made sure to clarify that the Fed is backing up the economy with all the means it has and will be doing so as long as it takes.
The US dollar didn’t lose more value than it would under current trends. Against the JPY, is actually gained recently, although a larger mid-term trend is a decline. Against the EUR, it also slightly gained, while the larger direction during the last week has been sideways.
The S&P, on the other hand, erased the gains of the last week’s rally, getting down to 3,140. We can only say, though, that Jerome Powell’s message merely confirmed the already existing downtrend. May observers commented on it earlier saying that the stock market did a bit too much into the bullish direction last week, and had to cool down. The Fed’s message merely underlined and sealed this layout.
The economy is still in a recovery path. It is obvious and will just take time to complete. From the emotions point of view, all the market has to do is to not get overly optimistic and hopeful about the velocity of this recovery. But fundamentally, it is already around the corner, and proper waiting should bring its fruits.
US Retail Sales will be out on October 15 at 15:30 MetaTrader time (GMT+3).
The crypto market keeps recovering. Bitcoin has broken above $57,000. The way up to $60,000 is open now!
The US dollar is heading to close the seventh day in the red as it remains under selling pressure. The US data at 15:30 GMT+3 (jobless claims and Philly Fed Manufacturing Index) may support the greenback if it's strong.
Canada will publish the Retail Sales and Core Retail Sales on October 22, at 15:30 MT time (GMT+3).
The United States will release the weekly Unemployment Claims on October 21, at 15:30 MT time (GMT+3).