The Fed left its target range for the federal funds rate unchanged at 0-0.25 percent and said it would continue to buy bonds at a pace of $120 billion per month despite rising inflation and an improving economy.
U.S. monetary authorities acknowledged that indicators of economic activity and employment have strengthened thanks to progress on vaccination and strong policy support, but policymakers stressed that the pandemic continues to weigh on the economy and risks to the outlook remain. Jerome Powell, head of the Federal Reserve, added that inflation is driven by transitory factors and still seemed to spell reality that price increases for consumers will not accelerate at a significant pace later in the year. Hence, according to Powell, there is currently no space to even discuss reducing the scale of asset purchases. The market, on the other hand, was a little worried that this topic might be brought up now. Instead, it got a very dovish message, which could have hit the US currency.
The Dollar Index was above the 90.5 level on Thursday and remained close to the nine-week lows reached on Wednesday following the Fed decision. The EUR/USD major currency pair rose to 1.2150 in the evening and was at its highest since late February. It seems, however, that such a sharp weakening of the USD after a relatively strong trend of weakness in the US currency since the beginning of April may be a breakthrough for the USD and thus the beginning of its strengthening. In such a case, EUR/USD could try to retreat at least to 1.2000. Further fate of the dollar this week may be influenced by US GDP data and March core consumer spending data.
U.S. stock futures rose sharply on Thursday, and the S&P 500 appears to have set another all-time high. Bulls on Wall Street were supported by excellent results of the world's largest listed company, Apple. The Cupertino-based company rose nearly 2.5 percent after reporting better-than-expected results, posting sales 54 percent higher than last year.
President Joe Biden on Wednesday proposed a sweeping new $1.8 trillion plan aimed at families, arguing that spending is necessary to keep pace with China and adding that he is willing to work with Democrats and Republicans to come to an agreement and implement another stimulus package.
Today, investors will await the results of another star of the current bull market, Amazon.
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.
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