Today it is difficult to find another main topic than the one regarding the Fed's semi-annual report on monetary policy, which will be presented by the Chairman of the US Federal Reserve before the committees of the House of Representatives and the Senate today and tomorrow at 16:00. The actual content of the report should appear today before 16:00.
Jerome Powell will probably reinforce the view on interest rates cuts in speeches before Congress, even in spite of recent better employment figures. However, the result of the report from the labor market caused that investors had to reduce their expectations regarding the cut by 50 basis points and leave a 25 point cut on the table. In addition, there was information on the market that investors might be buying the dollar because of the probability that the Fed will be less dovish. Looking at market expectations regarding interest rate cuts by the end of the year, these have decreased from around 80 basis points two weeks ago to 64 today.
In addition to the US dollar, it is worth paying attention to the Australian dollar, where, for now, economic data does not improve. The consumer confidence index published today has dropped to its lowest level in two years. The last two interest rate cuts and tax relief did not improve sentiment. The measure of economic conditions for the next 12 months decreased by 12.3 percent, and the family finance index by 8 percent. The economic outlook for the next five years also fell by 6.7 percent. - results from published data. Consequently, the Australian dollar is losing in the morning on the fifth day in a row.
On the commodity market we can see a further rise in oil prices, which seems to be gaining thanks to another drop in crude stocks in the United States. Evening API data showed that weekly oil inventories fell by as much as 8.1 million barrels. It is the largest decrease since December 2018. What's more, this is the fourth week of reducing US oil stocks in a row.
Today, in addition to the report on monetary policy, it is worth paying attention to the decision of the Bank of Canada on interest rates (also at 16:00) and the BoC report at 16:30. Before noon, at 10:30, important data for the British pound will be published (GDP). In turn, at 20:00 the minutes of the last Fed meeting will appear. This day seems to be very interesting.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
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