Fundamental analysis

Stock rally ends on the eve of Fed meeting (expect a corrective decline in EUR/USD and AUD/USD)

As expected, the ECB raised the discount rate by 0.75%, so there was no serious market changes. But future plans are still unclear, so market players are focused on the bank’s upcoming report.

After another 75bp hike and a dovish tone on the future monetary policy, markets began to prepare for what is likely a slowdown in growth rates. Many assume that in December, the ECB will raise the rate not by 0.75%, but by 0.50%. This is signaled further by the preservation of the TLTRO program.

But the hawkish stance of the Fed regarding its policy keeps EUR/USD below parity, so at the time of writing, the pair is trading around 0.9976. A decline will continue if, following the Fed meeting, the key interest rate is raised by 0.75%. If there is a decrease but no pauses on rate hike, dollar will rise further against all major currencies.

As for the stock markets, rally ended on the eve of the Fed’s meeting. Meanwhile, demand for dollar rose, which may continue after the release of updated data on personal consumption expenditures.

Forecasts for today:

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EUR/USD

The pair is trading below 0.9950. Further pressure will push the quote to 0.9820 next week.

AUD/USD

The pair fell below 0.6440 amid the strengthening dollar ahead of the Fed meeting and expectations of a slower GDP growth in China, which is Australia’s main trading partner. Most likely, quotes will drop further to 0.6340.

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


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