The Fed Is Bringing Markets Back To Life

Fundamental analysis of Forex market

Last night, the Dollar lost about 0.4%, reaching 1.1909, around which it is quietly trading on Tuesday morning. The Dollar index dropped 0.5% yesterday and has so far remained around 91.935 in anticipation of further drivers.

They won’t take long to manifest: Powell is speaking to Congress today. It is expected to confirm the steady improvement in the US labour market. In the medium term, Nonfarm Payrolls and Unemployment are indicators that investors will be looking at. These data can significantly affect the position of the Federal Reserve System, and with it, the entire global stock market.

Last week the Federal Reserve System caused a drop in global indices, signalling that it will raise interest rates at a faster pace than previously expected. Also, representatives of the regulator are going to consider the possibility of cancelling monetary incentives in the near future. In general, they moved their forecasts for the first potential increase from 2024 to 2023, and some of them did not rule out this being as early as 2022.

The Fed’s pivot to the beginning of policy normalization is fueled by the rapid rise in inflation: a dynamic that has kept financial markets under pressure over the past few months.

St. Louis and Dallas Fed Chairs also softened their rhetoric yesterday. As a result, this morning, world indices continued their recovery from the levels of four-week lows. Investors focused on the post-pandemic growth prospects and stopped worrying about the US regulator’s hawkish stance. So, futures on EuroSTOXX 50 rose by 0.4%, and the contract on the FTSE rose by 0.3% over the morning.

MSCI, a broad Asia-Pacific stock index without Japan, added 0.4%, posting a 4% increase since the beginning of the year. In Japan itself, optimism is also growing: the Nikkei rose 3.1% on Tuesday. Stocks in South Korea rose 0.7%, Australia rallied 1.6%, and China rallied 0.8%.

Meanwhile, Brent has surpassed $ 75 for the first time in two years. The last time the quotes reached this mark was on April 25, 2019.

The cost of August futures on ICE reached $ 75.09, while WTI rises to $ 73.17.

Brent prices have already increased by 40% this year on the recovery of the United States, China, and Europe after the pandemic, with fuel consumption increasing. At the same time, the return of coronavirus in a number of Asian countries serves as a reminder that the recovery of national economies around the world will not be uniform.