Fed inspired the markets

On Tuesday, after Fed Chairman Powell’s speech, the dollar perked up against all major currencies. On Wednesday morning, AUDUSD fell 0.13%, NZDUSD lost 0.23%, USDCNY lost 0.01% to 6.4806, and GBPUSD fell 0.11%. The dollar index is now showing gains, adding 0.13% to 91.873.

The regulator’s comments gave support not only to the American currency but also to the stock market. Powell assured investors that the Fed keeps its finger on the pulse of inflation but is in no hurry to raise rates.

As a result, the interest-rate-sensitive Nasdaq closed Tuesday at an all-time high. MSCI, a broad Asia-Pacific stock index without Japan, rose 0.4%, while the purely Japanese Nikkei also added 0.3%.

Note that last week, statements from the Federal Reserve System put pressure on stock prices and raised the dollar with an unexpected forecast of a rate hike in 2023.

However, overnight, Powell echoed the Fed’s goal of an overall labour market recovery and said that fear of inflation alone would not be enough to trigger an increase. He told the House Commission that he would “wait for evidence of actual inflation or other imbalances.”

The words helped lower the yield on US 10-year Treasuries, which fell to 1.4666% on Tuesday and remained at that level at the start of the Asian session on Wednesday.

In commodity markets, the Fed’s position has also played a role: oil prices are approaching multi-year peaks, despite the fact that producers are discussing an increase in production.

The price of a barrel of Brent hit 26-month highs, reaching $ 75.22 a barrel, while WTI futures rose 0.4% to $ 73.16.

In general, the market remains optimistic about the recovery in demand after the expected lifting of coronavirus restrictions on the movement of people between countries.

As mentioned at FxPro, New Home Sales for May and June manufacturing PMI will be published today. However, investors will wait for Friday, when the PPI data becomes known, which will become the main driver for the near future.