The US Federal Reserve's interest rate decision will be published today. On this occasion, we will also get the statement on the conduct of monetary policy in the US, and half an hour later the press conference of Jerome Powell, Chairman of the Fed, will begin.
It seems that the market expects the Federal Reserve to leave the parameters of the FOMC monetary policy unchanged. However, the key question is what Fed representatives think about the so-called tapering. What does tapering of quantitative easing mean? Quantitative easing (QE) means increasing the money supply in the system. Quantitative easing tapering, on the other hand, is the opposite policy to quantitative easing (QE). It is a situation where the scale of asset purchases is reduced in order to normalize monetary policy.
The market expects the QE program to be maintained at $80 billion for Treasury bond purchases and $40 billion for mortgage-backed securities (MBS) purchases, and the U.S. central bank is expected to confirm that it will not withdraw its purchases anytime soon. However, in the short term, inflationary pressures from the economic recovery, significant fiscal stimulus and rising commodity prices are increasing this year, which could prompt policymakers to tighten policy earlier than initially expected. The Fed is also expected to renew its commitment to keep interest rates near zero and thus borrowing costs low for as long as necessary. The Fed is also expected to do everything in its mandate to help the economy recover from the epidemic crisis. The range for the federal funds rate is to stay at 0.00-0.25 percent.
It seems that the Fed's attitude that will be outlined today may have further implications for the US dollar as well. The market is talking about increasing pressure on the strengthening of the USD, especially as the European Central Bank is getting bolder about the overly strong euro. First, European Central Bank policymakers agreed to take a deeper look at the euro's appreciation against the dollar since the start of the pandemic, and then Klaas Knot, a member of the ECB's Executive Board, said that the institution is monitoring the strengthening euro and has the tools to counteract the common currency's appreciation.
The rate of the main currency pair after these comments fell to the level of 1.2120. It seems that if the barrier at 1.2100 is broken, then the way to lower levels could be opened. Then the key levels could become around 1.2000, and then at 1.1700 and 1.1600.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
76.44% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Trade this news from Conotoxia Ltd. platforms
Go to your account
