Fed Not Worried About Inflation, EUR/USD Under Pressure, EUR/GBP Bearish Ahead Of BOE

The FOMC Statement and projections from yesterday sent the dollar lower and the stock market at the highs. The Fed did not step away from its accommodative measures, despite pressure from the positive economic data and increased pace in the vaccination rate.

Because it signaled temporary inflation and a stronger GDP than initially thought, the Fed’s message triggered a risk-on move across financial markets. Right after the FOMC Statement, the Dow jumped closer to it’s an all-time high, the dollar declined across the board, and the trend did not change for the entire length of the press conference that followed.

In Europe, the main indices traded in a tight range, waiting for clues from the United States. The European Commission gave yesterday more details about the vaccination plan ahead, while most of the European countries announced the start of a third wave of the pandemic.

Commodities traded mixed yesterday, with precious metals having a great day after the Fed’s message. Gold and silver gained around 1%, respectively 2%, while the crude oil price declined a little more than half a percentage point. Copper had another great day, up almost 2% as the commodity buying frenzy continues.

Daily Analysis

The day ahead is all about how the markets digest the message from the Fed and what the Bank of England’s decision will be. In the case of the Fed’s message, it would be interesting to see if the European indices follow the U.S. ones higher, as the improved economic outlook across the ocean should have positive economic effects in Europe as well. However, the other way around is valid too – a deeper recession in Europe may drag the U.S. performance.

As for the Bank of England, the most interesting thing to watch is the bank’s reaction to the recent drop in trade numbers with the European Union. If the bank sees it as continuing in the future, it may act preemptively.

Markets to Watch

S&P500, EURGBP, EURUSD  – markets in focus today.

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Disclaimer: None of the content in this article should be viewed as investment advice or a recommendation to buy or sell. Past performance/statistics may not necessarily reflect future ...

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