News background & trading ideas for 20/03/2019
Yesterday’s statistics on the UK labor market. The data turned out to be quite good: unemployment rate appears better than forecast (3.9% with a forecast of 4%), employment rate is much better than experts' expectations (+ 222,000 with a forecast of + 120,000), average wages is also higher than expectations (+ 3.4% with a forecast of + 3.2%). So, the "attempt” of the pound to consolidate above 1.33 in a pair with the dollar is quite understandable.
Today will also be quite stressful for the pound, because the UK inflation statistics will be published. Considering that on Thursday the Bank of England should announce its decision on the parameters of monetary policy, this data is particularly important.
We will talk about possible outcomes of the Bank of England meeting and the pound tomorrow but today we will focus on the main event of the week - the announcement of the decision of the Federal Open Market Operations Committee (FOMC). After the beginning of 2019 the Fed put the process of improving process “on pause”, the situation with US monetary policy remains uncertain. The current consensus - in the second half of 2019, the rate will still be raised, but most likely in 2019 this will happen only once.
If earlier such a consensus has been perceived by the markets as a given, and traders have already incorporated this development option into prices, now everything is different. The fact is that there is at least a 25% chance that the rate in 2019 will generally be reduced. And the question of reducing the balance of the Fed remains unclear. Whether it go on or not? Or will the Fed pause it?
In general, today's FOMC meeting may shed light on issues of the markets. The likelihood of the “pigeon” position of the Fed (consists in not raising rates or even reducing them and refusing to reduce the balance of the Fed), which means that the dollar could be well subject to sales this evening. But on the other hand, there are chances that the Fed will confirm plans to raise rates in 2019, and this is good for the dollar. So, you need to carefully follow the decisions and comments of the Fed. Our expectations are in voicing the “dovish” position of the Fed and, accordingly, we are waiting for the dollar to fall.
Our trading tactic today is unchanged: we are looking for points for buying gold and oil, sell the dollar and the ruble.
Today will also be quite stressful for the pound, because the UK inflation statistics will be published. Considering that on Thursday the Bank of England should announce its decision on the parameters of monetary policy, this data is particularly important.
We will talk about possible outcomes of the Bank of England meeting and the pound tomorrow but today we will focus on the main event of the week - the announcement of the decision of the Federal Open Market Operations Committee (FOMC). After the beginning of 2019 the Fed put the process of improving process “on pause”, the situation with US monetary policy remains uncertain. The current consensus - in the second half of 2019, the rate will still be raised, but most likely in 2019 this will happen only once.
If earlier such a consensus has been perceived by the markets as a given, and traders have already incorporated this development option into prices, now everything is different. The fact is that there is at least a 25% chance that the rate in 2019 will generally be reduced. And the question of reducing the balance of the Fed remains unclear. Whether it go on or not? Or will the Fed pause it?
In general, today's FOMC meeting may shed light on issues of the markets. The likelihood of the “pigeon” position of the Fed (consists in not raising rates or even reducing them and refusing to reduce the balance of the Fed), which means that the dollar could be well subject to sales this evening. But on the other hand, there are chances that the Fed will confirm plans to raise rates in 2019, and this is good for the dollar. So, you need to carefully follow the decisions and comments of the Fed. Our expectations are in voicing the “dovish” position of the Fed and, accordingly, we are waiting for the dollar to fall.
Our trading tactic today is unchanged: we are looking for points for buying gold and oil, sell the dollar and the ruble.
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