As we have already mentioned in the previous article, last week the market was affected by the monetary policy decisions of some very important states.
First, the Federal Reserve, as expected by traders, raised interest rates at a range of 1,00% — 1,25%. It is his third rise in rates over the last seven months.
The American Central Bank published later the up-to-date forecasts on the US economy.
FOMC’s statements have been optimistic, improved economic forecasts, dot plot promises another boost in 2017 to 1,25%.
President Janet Yellen spoke with a reassuring language during the press conference that followed the decision.
There are signs that the economy and the labor market are strengthening in anticipation of the falling in unemployment rates to 4,2% by 2019. Household spending has risen and fixed investments have continued to rise.
The FOMC also reported to ‘monitor closely inflation developments’ and it will slowly stop reinvesting with quarterly adjustments to $30 billion a month in Treasury and $20 billion a month in MBS.
The dollar has responded with a rise, bringing the price to 1,1186, thanks to Federal Reserve’s belief that inflation will rise in the near future, despite the latest disappointing data.
On the other hand, Japan’s Bank of Japan has decided to leave unchanged the interest rates which remain in negative territory.
Kuroda’s Bank of Japan has confirmed interest rates at-0,1%. The central bank’s decision on the country’s monetary policy was largely anticipated by most of the analysts.
As expected, also the Board of the Bank of England confirmed the interest rate level of the United Kingdom at 0,25%. The vote saw 5 favorable members and 3 members against. The British central bank decided then to leave its stock purchase program unchanged for £435 billion and the corporate bond for 10 billion pound.
The news made jump the pound to the high level at 1,2796. The surprise has not derived from the decision but from the spread of the number of votes in favor of a rise in rates.
The fact that 3 out of 7 members of the committee voted in favor of raising interest rates suggested that a change in the monetary policy is beginning to be felt by the central bank.
Moving to the eurozone, inflation stabilizes in the revision for May. Last month the consumer price index rose 1,4% per year, confirming the previously reported figure, still far behind the target set by the ECB below just 2%.
On a monthly basis, inflation fell to-0,1%, as expected by analysts, against + 0,4% in the previous year.
After the week where the central banks have been protagonists, between June the 19th and June the 23th, markets will focus on the beginning of Brexit negotiations and on the words of members of the Federal Reserve, United States Central Bank.
Forex trader will focus on US real estate data to assess whether the recent downturn in inflation has affected the house prices and sales.
PMI indices are also planned to determine the performance of manufacturing and services sectors, especially in the euro zone.