One of the fundamental control units of the FED’s monetary policy – the interest rate – was left untouched at the end of the FOMC meeting on Wednesday. Among the market expectations, the prevailing view was that the regulator would not rush to raise the rate. So, traders focused on the press release instead, which contained specific wording elements that surprised the market. For an example, economic activity “slowed” in May, although it “expanded at a moderate pace,” in March, despite the continued strengthening of the labour market.
Sluggish GDP growth in the first quarter was described as “transitory” and the regulators expect that providing a gradual adjustment to the monetary policy would continue to help the economy grow at a moderate pace. The rate hike possibility rose immensely for July as the weak data in the first quarter would force the FED to be more cautious in its statements. Futures on the federal fund’s rate priced in a 73.8% probability of a rate hike.
For the US Dollar, the report was undoubtedly bullish. The Dollar index rose to the level of 99.20 and then receded to the level of 99.00, which is a possible start platform or a drop, depending on the data released on Friday.
The precious metals and Yen accelerated declines, and the Euro approached the level of 1.10, as the centrist Emmanuelle Macron won the final debates ahead of the second election round. The struggle unfolded for 18% of the undecided electorates and in the discussions about terrorism, economics and membership in the Europe, Macron seemed to convince the audience to vote for him. According to the BFMTV survey conducted on a sample group of 1,314 people older than 18, two-thirds of those surveyed believed that Macron is a lot more defined in his political positions and easily exposed the weaknesses in the arguments against Le Pen. The chances for a Macron victory in the second round are 59% against 41% for Le Pen.
The optimism in the Oil market fades, as drilling activity in the US nullifies all the efforts of the OPEC to reduce the surplus in the market. Prices fell 1% on Thursday after the EIA report showed the supplies decline in the US. Stockpiles have been shrinking for the fourth week in a row, but the market focus is on OPEC officials’ comments, who are keenly discussing the extension of the agreement for another six months.
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