18.03.202111:16 Forex Analysis & Reviews: Fed and Powell contributed to the growing demand for company shares and local weakening of the US dollar

As the markets had hoped, the Fed's final decision on monetary policy and Powell's speech after the meeting, were in line with the previous ultra-soft prospects. Investors clearly perceived it well, which resulted in the weakening of the US dollar and the continuation of the renewed demand for risky assets.

The results of the US regulator's meeting was an actual appeal to the financial markets that it will not change all the key positions of monetary policy until 2023, that the monthly purchase of government bonds and mortgage securities with a total volume of $ 120 billion will continue, and interest rates will not change despite the strengthening of economic growth, and the expected increase in inflationary pressure. In fact, the Federal Reserve System and its head, Powell confirmed that the monetary rate will remain unchanged even if the economy experiences some kind of "overheating".

How did the currency markets react to this news?

There is no doubt that their reaction was expected. Both the Fed's statement and its Chairman's speech about maintaining the super-soft course of monetary policy expectedly led to a sharp weakening of the US dollar, as well as to the growth of the company shares' demand. This morning, the US stock market and the Asian one, have significantly increased, which was expected from the European trading session. This was indicated by the stock index futures. Now, we believe that trading in Europe will continue the rally that started in the United States.

On another note, the US dollar is likely to remain under pressure today, even though the yield of treasuries continued its growth after the Fed meeting. It may also possibly continue tomorrow, since investors' focus is completely shifted towards a tendency to risky play, which usually leads to a weakening of the US currency. So far, it was highlighted that the market did not react to the strengthening of the growth of government bond yields. In any case, the yield of the benchmark 10-year treasuries is rising by 3.02% and is at 1.690%, reaching a new post-pandemic high.

Assessing the current market situation, we believe that it is possible to sell the dollar against all major currencies. It is also suggested to pay attention to company shares that have noticeably plunged during the pandemic and are currently being bought up actively by investors who reasonably believe that the recovery of the world economy, and then its growth, will support the demand for these assets.

Forecast of the day:

On the wave of maintaining positive sentiment in the markets, the EUR/USD pair may continue rising to 1.2100 after breaking the level of 1.1990.

According to the results of the BoE meeting, the GBP/USD pair can break through the level of 1.4000 and move towards the level of 1.4175.