Fundamental analysis

Markets are hoping for a change in the Fed’s policy (look out for a decline in EUR/USD and GBP/USD)

Stock markets in Europe and the US traded positively on Monday due to growing hopes that the Fed, after another 0.75% rate hike in November, could either slow down the rate of increase in borrowing costs, or make another pause in December. The driver of such a mood was the recent statement of Fed member Christopher Waller, which stated that the central bank will discuss the issue of continuing the aggressive course of raising interest rates at its meeting in November. Markets also began to speculate that at the December meeting, the Fed will raise the rate not by 0.75%, but by 0.50%. This will increase the overall level to a range of 4.35% to 4.50% by the end of the year. There are also hopes that the rates would not rise at all in December.

Most likely, the positive sentiment will continue as markets want to believe in the best. They cling to any news that gives rise to hopes. After all, stock markets have fallen noticeably ever since central banks raised interest rates due to high inflation. For example, the S&P 500 hit a local low of 3500.00 points on October 13, and has every chance of falling towards 3200.00-3300.00. This means that the current rally is likely to be local, with a subsequent resumption of adecline.

Regarding the dynamics of dollar, there is little chance for a decline as Treasury yields remain at local highs, which supports interest in the US currency. Most likely, movement will be sideways, followed by a slight decline.

Forecasts for today:

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EUR/USD

The pair is trading in a short-term uptrend. A decline below 0.9860 could encourage a fall to 0.9750, provided that the growth of treasury yields resumes.

GBP/USD

The pair remains in the range of 1.1135-1.1410. If it falls below 1.1265, there is a high chance that the quote will drop to 1.1135.

The material has been provided by InstaForex Company – www.instaforex.com


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