View Single Post
  #25  
Old 10-06-2020, 12:36
TickmillNews TickmillNews is offline
Level IV Lasers Member
 
Join Date: Aug 2018
Posts: 119
Default Re: Tickmill UK Fundamental Analysis

USD: Downside Trend on Pause?

The US Dollar hit a serious obstacle during decline on Monday which apparently helped bulls to gain control on Tuesday. A convenient explanation of this pullback is the process of pricing in the uncertainty related to the Fed’s meeting outcome on Wednesday. The US Central Bank has already signaled that it is unwilling to make “liquidity bazooka” a permanent feature of its policy quickly and quietly reducing bond purchases to a minimum

One way to understand why the FOMC meeting in June can offer really strong support to USD is to notice that macroeconomic situation in the United States has improved significantly since the last meeting, and it may seem that this recovery is becoming less and less consistent with various emergency programs of asset purchases, zero interest rate, credit facilities that the Fed has been rolling out since mid-March. Here we can also include purchases of commercial papers, corporate ETFs, support for the “fallen angels”, credit facility for the so-called “Main Street” (i.e. small firms) which played key role to keep interest rates subdued in corporate financing markets. Robust stock market growth hinges a lot to the expectations that this cheap liquidity will remain in place. Expectations for QT or at least a bit more hawkish stance is clearly visible in the treasuries futures market

The chances of interest rate hike by 25 basis points at June meeting rose from 0% from early May to 16%. It is reasonable to assume that these expectations are also priced in USD, so if the Fed makes it clear tomorrow that it does not share the optimism of the latest data, this will signal to market participants that the easing bias is still here which is negative for USD. And vice versa.

Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.

High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 73% and 70% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Reply With Quote