Fed Protocol, BoC, and the UK

11 lug 2019

As we all know “the market is addictive to news”, it is not wondering that yesterday’s testifying to Congress by Fed Chair Jerome Powell, the announcement of the Bank of Canada decision on monetary policy, as well as a fairly extensive block of statistical data from the UK, led to increased volatility in financial markets.

Let's analyze these events in chronological order.

Great Britain relaxed quite positive data, which triggered the pound growth. Recall, we recommended its purchases, so those of our readers who looked up to our advice made good money. GDP and industrial production value have increased we cannot but mention the data on construction and trade balance that pleasantly surprised, appeared much better than forecasts.

Bank of Canada holds interest rate steady, Federal Reserve Chairman Jerome Powell said that rate cut is not a panacea.

Jerome Powell’s testimony at Congress. Markets expected him to make statements/comments about the Fed rate cut. However, Powell noted that the risks remain steady for the US economy, due to business investment slow down caused by the trade war, while inflation remains weak, which suggests that interest rates might be reduced this month.

After Powell's testimony, the minutes of the last FOMC Fed meeting were published. Which only strengthened markets confidence in lowering the rates in the USA. The discussion of the Fed members about the prospects for monetary policy at the last meeting showed that there is a strong bias towards cut rates.

The result is a short dollar. But inflation statistics from the US, as well as the second day of Powell’s testimony, may well trigger a rise in volatility in pairs with the dollar.

Our trading recommendations for today are as follows. We continue to look for opportunities for selling the dollar (USDJPY, EURUSD, GBPUSD). Sell the Russian ruble. We are looking for points for sales of gold, which again climbed very high.