The US dollar is on the front foot during early Thursday trading, following yesterday’s FOMC policy decisions and speech by Jerome Powell. The Fed Chairman reiterated the central bank’s commitment to its current monetary policies but predicted stronger growth and higher inflation than had previously been expected. The acknowledgement by the Fed that inflation is likely to rise above 2% this year triggered a fresh sell-off in Treasuries, with the yield of the 10-year note rising above 1.7% for the first time in over a year and offering support to the greenback.
Although gold initially reacted positively to the FOMC’s decisions by spiking up to $1,750, those gains have been washed away by a fresh wave of dollar strength. While gold’s failure to hold onto the psychologically important level of $1,750 may raise alarm, the medium term outlook still looks supportive with a dovish Fed stating that any tapering is still some way off a bullish factor for the yellow metal.
European assets followed the global trend by edging higher on Thursday as investors continued to cheer yesterday’s monetary decision from the Fed. The risk-on trading stance has taken hold on most benchmarks after Jerome Powell surprised investors who were expecting a more hawkish tone from the central banker. This little wind of relief was enough to drive prices higher on riskier assets, in the very short-term at least. The fact that the Fed has confirmed it will keep on sustaining the economy until there clear signs of a recovery will serve as a strong catalyst for traders. However, the lingering inflation worries in the medium term may weigh on investors and keep the current rotation from growth shares to value stocks going. Meanwhile, investors will now switch their focus back to Europe with today’s speech from ECB President Lagarde as well as the monetary decision from the BoE.
The SMI-20 Index is one of today’s best performers with the Swiss market now trading above its major resistance zone between 10,890pts and 10,910pts, which could open the doors to an extended rally with 11,000pts the new main target.
Pierre Veyret– Technical analyst, ActivTrades
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Experienced writer and journalist, working in the global online trading sector, Steffy is the Editor of LeapRate. She has previous experience as a copywriter and has been with the company since January 2020. Steffy has a British and American Studies degree from St. Kliment Ochridski University in Sofia.