Merchants enamored with the minute by minute fluctuations in so-called meme shares like Gamestop (GME) and AMC Leisure (AMC) might not have seen, however we simply noticed a much more longer-term and macroeconomically-significant information merchandise land: The Federal Reserve’s January financial coverage assembly.
As we outlined in yesterday’s FOMC Preview report, the central financial institution was by no means going to make any speedy modifications at at this time’s assembly, however the markets would nonetheless key in on any modifications the central financial institution made across the margins of its assertion and in Jerome Powell’s press convention.
In the case of the assertion, the Fed made comparatively few modifications, because the beneath “pink line” exhibits:
Supply: Federal Reserve, GAIN Capital
The largest takeaways from the central financial institution’s assertion are that the tempo of the restoration has slowed and that the Fed can be carefully monitoring the progress of vaccinations as step one towards normalizing financial coverage. The assertion continues to emphasise that the FOMC must see inflation run above 2% for a while earlier than eradicating the present accommodative coverage stance. Put merely, there have been no indicators within the assertion that the central financial institution has modified its outlook on the US financial system and financial coverage.
As we go to press, Fed Chairman Powell is winding down his press convention and has typically burdened the significance of remaining accommodative and versatile till inflation really begins to choose up. Highlighted feedback from the presser observe (emphasis ours):
- PATH OF THE ECONOMY CONTINUES TO DEPEND SIGNIFICANTLY ON THE VIRUS
- REAL UNEMPLOYMENT RATE CLOSER TO 10%
- VERY UNLIKELY THAT WE’LL SEE TROUBLING INFLATION
- SEVERAL DEVELOPMENTS HAVE SIGNALLED A BETTER OUTLOOK LATER IN 2021
- MONETARY POLICY IS PLAYING A KEY ROLE IN SUPPORTING ECONOMY
- LIKELY TO TAKE SOME TIME FOR SUBSTANTIAL FURTHER PROGRESS TO BE ACHIEVED
- POLICY TO REMAIN ACCOMMODATIVE UNTIL GOALS REACHED
- TOO EARLY TO BE TALKING ABOUT DATES ON TAPERING
- PATH AHEAD REMAINS HIGHY UNCERTAIN
- POWELL, ASKED ABOUT GAMESTOP, DECLINES TO COMMENT (you realize we needed to sneak that one in right here!)
Regardless of the Fed’s typically dovish, steady-as-she-goes tone, US indices have deepened their selloff, with main indices buying and selling decrease by 2-3% forward of the shut. Each gold and oil are additionally ticking decrease together with the yield on the benchmark 10-year treasury bond (-2bps to 1.02%). In FX, the US greenback has recovered off its noon lows to renew the uptrend from at this time’s Asian and European classes. With little in the best way of recent data from Powell and Firm, merchants might take a look at this near-term rally within the dollar as a promoting alternative till the longer-term 50- and 100-day EMAs begin to flip.
Supply: TradingView, GAIN Capital
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