FOMC yesterday meeting became an acknowledgment that the pace of policy normalization planned by the regulator creates visible risks of cooling the economy. After two rounds of tightening since the beginning of this year, consumer inflation in the US has been steadily declining for four consecutive months - from 2.7% in February to 1.6% in June. It does not at all resemble the temporary slowdown that Janet Yellen spoke about in May, is not it? And the last four months the consensus forecast on inflation each time turned out to be overestimated, i.e. unreasonable optimism prevailed in market expectations. The words that inflation still remains below the target level sent the dollar to search for a new bottom.
Despite the Fed statements that monetary policy is independent from the government, the difficulties of the new administration headed by Trump with fiscal and tax reforms, most likely forced the regulator to review the pace of tightening. The gloom spread among investors as third rate hike with fading hopes for fiscal stimulus become less and less reasonable . The Fed's promise to start reducing the balance of assets this year also lowered the chances of a December increase, as the simultaneous use of several restraint measures, with the current dynamics of inflation, looks like a risky undertaking. Futures on the rate price in no more than 34.1% of the third increase this year. After the decline to the level of 93.00, the dollar index won back some of the losses returning to the level of 93.50.
Gold prices rise for the second consecutive day on Thursday and reached a maximum of six weeks, as the dollar fell to a minimum of 13 months after the Fed meeting, which made it clear to the market that the regulator will not rush to tighten monetary policy.
On Wednesday, oil prices recorded the third consecutive growth session after the release of data on oil reserves in the US for the fourth consecutive week. This firmed hopes for market rebalance.
Reserves of crude oil decreased by 7.2 million barrels last week, reaching 483.4 million barrels, significantly exceeding the forecast of 2.6 million barrels. The report also showed that gasoline stocks in the US fell by 1.0 million barrels against the expected decline of 0.6 million barrels.
Oil prices are set to rise over the week by more than 6%. The sentiment of investors improved after statements by the representatives of Saudi Arabia and Nigeria on the reduction of oil exports and production.
Despite the Fed statements that monetary policy is independent from the government, the difficulties of the new administration headed by Trump with fiscal and tax reforms, most likely forced the regulator to review the pace of tightening. The gloom spread among investors as third rate hike with fading hopes for fiscal stimulus become less and less reasonable . The Fed's promise to start reducing the balance of assets this year also lowered the chances of a December increase, as the simultaneous use of several restraint measures, with the current dynamics of inflation, looks like a risky undertaking. Futures on the rate price in no more than 34.1% of the third increase this year. After the decline to the level of 93.00, the dollar index won back some of the losses returning to the level of 93.50.
Gold prices rise for the second consecutive day on Thursday and reached a maximum of six weeks, as the dollar fell to a minimum of 13 months after the Fed meeting, which made it clear to the market that the regulator will not rush to tighten monetary policy.
On Wednesday, oil prices recorded the third consecutive growth session after the release of data on oil reserves in the US for the fourth consecutive week. This firmed hopes for market rebalance.
Reserves of crude oil decreased by 7.2 million barrels last week, reaching 483.4 million barrels, significantly exceeding the forecast of 2.6 million barrels. The report also showed that gasoline stocks in the US fell by 1.0 million barrels against the expected decline of 0.6 million barrels.
Oil prices are set to rise over the week by more than 6%. The sentiment of investors improved after statements by the representatives of Saudi Arabia and Nigeria on the reduction of oil exports and production.
This analysis is provided as general market commentary and does not constitute investment advice. Past performance is not indicative of future results