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Fed offers insights on future monetary policy, U.S. economic figures impress - Market Overview

Fed offers insights on future monetary policy, U.S. economic figures impress - Market Overview

Fed Vice Chair Clarida anticipates rate hikes starting in 2023. This statements had a significant effect on the markets, specifically on the U.S. Dollar.

However, Fed's decision to raise rates would largely depend on economic data, particularly employment figures. Still, Mr Clarida expressed his optimism about job creation after the latest published data. He said that it could be possible for the withdrawal of monetary stimulus policies to start as early as the end of the current year. The Fed Vice Chair was also surprised by the performance of Treasuries, saying he wasn’t expecting yields to drop as low as they did.

Economic reports - ISM data beats forecast.

The ISM Manufacturing PMI data surprised investors, racing to 64.1 vs the 60.1 expected. Also, the non-manufacturing ISM employment component shot up to 53.8 compared to 49.3 the previous month, indicating that it was entering a growth phase. The Non-Farm Payroll figures will be published tomorrow. Should we see a robust rise in employment and a substantial drop in the unemployment rate, it could support Clarida's optimistic statements.

The Forex market.

Fed’s new insights and the positive economic reports changed the market outlook, boosting the U.S. Dollar and reversing its downward trend.

Yesterday, EUR/USD touched the resistance zone around 1.1890 again. However, after Mr Clarida’s statements and the publication of the non-manufacturing ISM, the pair fell abruptly to around 1.1830, under the 100-hour SMA line, due to the strengthening of the U.S. dollar. Below its current value, the intermediate support levels are 1.1760 and 1.1710.

Everything could largely depend on the crucial NFP and unemployment rate reports. Good job creation data could serve as an upward boost to the U.S. dollar and, therefore, it could apply pressure on the EUR/USD pair.

Today, the Bank of England’s Monetary Policy Committee meeting will take place. Although investors don’t expect any newsworthy material, it could still be possible to hear about a reduction in bond purchases. Additionally, the composition of the voters supporting the continuation of the Q.E. program and those in favor of a reduction could also be important, especially for the GBP.

The EUR/GBP pair has been showing a lateral behavior, although with a slight downward bias. Technically, it finds its main support between the 0.8470 and 0.8500 levels.

Sources: Bloomberg, reuters.com.

ويقر محلل Miguel A. Rodriguez الأبحاث المسئول بشكل رئيسي عن محتوى هذا التقرير البحثي, جزئيا أو كليا, أن وجهات النظر حول الشركات وأوراقها المالية الواردة في هذا التقرير تعكس بدقة وجهات نظره الشخصية فحسب, وبالتالي فإن أي شخص يتصرف بناء عليها يفعل ذلك على مسئوليته الخاصة بشكل كامل.

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