The dollar exchange rate is recovering from yesterday’s sell-off caused by the announcement of the interest rate: the Fed announced an increase from 1% to 1.25%, as expected. Moreover, 8/16 members of the Fed are counting on a re-increase of 0.25% this year, while 4/16 say a minimum of at least two more increases by the end of the year. The interest of the markets to these publications was minimal, and only after the decisive speech of Yellen the dollar became more active. The value of gold and stock assets fell. Yellen’s mood regarding the US economic performance was surprisingly optimistic, despite the fact that some macroeconomic data came below expectations. Yellen paid a lot of attention to inflation indicators, as she noted that the Fed expects an increase in inflation in the coming months. The growth of inflation will have a positive impact on the US dollar, while a slowdown in its rate may nullify the possibility of a further rate hike this year.
Thanks to a number of important publications, today in the center of the removal will be the English and Japanese central banks. According to preliminary estimates, the interest rate of the Bank of England will remain unchanged, so the greater interest in the markets will trigger the Monetary Policy Report. If the mindset of the Bank of England is decisive, you can count on the appreciation of the pound. The weakness of the bank will indicate a possible sell-off and a depreciation of the national currency.
Most likely, the Bank of Japan will also leave the rate unchanged. Therefore, in search of clues regarding the current and future state of the country’s economy, market participants will pay close attention to the publication of the Report on Monetary Policy. The more positive nature of the report, which points to the growth of inflation in the country, will lead to an appreciation of the yen. The bank’s more pessimistic attitude towards inflation or uncertainty about a stronger JPY may lead to an aggressive sale of the Japanese currency, as traders will redistribute their positions according to the views of the Bank of Japan.
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