Fundamental analytics

WEEKLY RESULTS 08.07-14.07.2019

FRS and ECB signal possible easing of monetary policy in the coming months

  1. Jerome Powell addresses the US Congress

  2. FOMC protocols

  3. ECB minutes of the meeting

  4. Oil price growth

The main event of the past week was the speeches of the head of the Federal Reserve Board in the U.S. Congress. Contrary to market expectations, the regulator did not see any signs of improvement in the economic situation in the country in recent weeks, and signaled the possible reduction of interest rates in the current month. Later published FOMC protocols in general confirmed the statements of Jerome Powell.

Currency market

The foreign exchange market was dominated by a trend of the dollar weakening against other currencies. This was investors’ reaction to the statements made by the Federal Reserve Board on possible easing of the monetary policy. At the same time, bidders did not react to the publication of the minutes of the last ECB meeting, which also indicates the tendency of the regulator to soften the monetary policy. Apparently, the ECB is preparing to lower the rate or resume the QE program. Some experts note that this year the ECB is going to use both instruments. First, the regulator may reduce the interest rate by 0.1% (presumably in September), and in November-December it will announce the resumption of QE program. The European economy started showing signs of weakness back in 2018, so the ECB's signals of monetary easing for the market are not unexpected, which is not the case with the Fed. Therefore, the European currency gained a small advantage over the dollar in the short run.  

The GBP/USD pair was also able to take advantage of the weakening of the dollar and partially recovered the previously lost positions. Nevertheless, the increased risks associated with the implementation of the "hard" Brexit scenario still put pressure on the GBP/USD pair, limiting its growth.

Rather volatile trades at the beginning of the week were demonstrated by USD/TRY pair. Turkish currency was under pressure after the resignation of the head of the Central Bank of Turkey Murat Cetinkaya last weekend.

Precious metals market

Gold was traded in different directions during the week, keeping the side vector of the movement in the range between 1383-1438$ levels. Certain support of quotations was rendered by the statements of the Federal Reserve Board about possible easing of the interest rate that led to the decrease of dollar and yield of the American treasuries. But since the demand for protective assets was limited, the instrument ended the trading week with a slight increase.

Oil market

The oil market was able to strengthen itself quite a bit during the week. First, the quotations were supported by the reports on the conflict in the Strait of Hormuz and the data of the US Department of Energy on a significant decrease in oil reserves. At the end of the week it became known about the suspension of about a third of offshore oil production in the Gulf of Mexico due to a deterioration of weather conditions.

 

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