Will global markets follow pied piper Powell   

29 April 2020 : The Dollar is weaker against all G10 and Asian currencies ahead of today’s Fed rate decision and the US Q1 GDP announcement. The Dollar index (DXY) has been on a downward trend since Friday, shedding about 0.7 percent so far this week to now trade around 99.70. The softer Dollar is aiding Oil’s rebound, while enabling Gold to keep its head above the $1700 psychological level which is on course for an 8.5 percent advance this month. 

The Fed is unlikely to make any major policy moves today, having already pledged trillions in emergency lending measures, while having an open-ended commitment to purchase assets under its QE programme. The US Q1 GDP print is widely expected to officially herald the end of the US economy’s record expansion, even as the estimated four percent contraction has been mostly priced into the markets already. Although the backward-looking data is unlikely to have a major impact on markets, it does form the base for the Q2 print, which is widely forecast to plunge into negative double-digit territory.

Chair Powell has a fine line to tread as it remains to be seen whether he can justify any show of defiant optimism about the US economy’s recovery prospects in the face of such dismal data. Markets will be primarily focused on any guidance that he may offer during his press conference. If the Fed does convey its utmost commitment to supporting the US economy and financial markets by remaining accommodative for a long time, that could power risk assets higher. 

Source: Han Tan, Market Analyst at FXTM

Reporting for EasyKobo on Wednesday , 29 April 2020 in Lagos, Nigeria

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