18.07.201911:12 Forex Analysis & Reviews: The period of uncertainty in the markets will continue until the Fed meeting at the rates (We expect continued growth of AUD/USD and NZD/USD pairs)

Incoming ambiguous data from US economic statistics continue to have a significant impact on the markets. They are also echoed by ambiguous statements by Fed officials, including its leader, Jerome Powell.

Published economic data show the absence of some directional certainty, which would allow investors to understand what can we expect in the future from the monetary policy of the American regulator. In the past few months, production figures generally indicate a decrease in activity, while at the same time there has been a stabilization of inflationary pressure and even a slight increase in it over the last month. An extremely ambiguous situation is taking shape in the labor market, but at the same time, everything indicates that new jobs are growing in low-wage segments of the economy.

Earlier, Powell pointed out certain difficulties and uncertainties in the prospects for growth of the national economy, as well as tensions in trade relations between the United States and China. But it seems that he, himself, is not ready to definitely say something about what the central bank will do in the present conditions. His vague statements, as well as the multidirectional comments of his Fed colleagues, indicate only that the regulator himself does not know what to do in such a delicate situation that history has not remembered for the past several decades.

As for market sentiment, they are slowly beginning to show a decrease in expectations for the start of a full-scale decline in interest rates. Today, the federal funds' rates show the likelihood of a reduction in the key interest rate by 0.25% at 61.0%, following a two-day meeting on July 30-31. Two weeks ago, they showed a value above 90% but at the same time, oddly enough, the expectations of lowering the rates immediately increased by 0.50% to 39% from a mark below 20% two weeks ago. It seems that these sentiments can catch up by July 30.

Of course, such a state of uncertainty affects the behavior of the US dollar, which nervously decreases. Then, on the contrary, it rises relative to the major currencies in the wake of the Fed's monetary policy uncertainty factor. This also fully influences the behavior of the local government bond market. The benchmark yield of 10-year-old treasuries has been consolidating for a month in the range of 1.95% -2.15%. This fully confirms our ideas that the main reaction of the market, which is likely to be only based on the results of the Fed meeting and time will tell whether there will be surprises.

Today we should pay attention to the publication of the minutes of the meeting of the Bank of England, as well as the publication of data on retail sales in Britain and the index of business activity from the US Federal Reserve Bank of Philadelphia.

Forecast of the day:

The AUD/USD pair found support at 0.7000. Overcoming the level of 0.7040 and fixing above it will lead to an increase in prices to 0.7100.

The NZD/USD pair is confidently trading above the mark of 0.6715. We believe that it retains the potential for local growth to 0.6800.