CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 70% of retail investor accounts lose money when trading CFDs with this provider.
You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 70% of retail investor accounts lose money when trading CFDs with this provider.
You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

Learn To Trade
 
Indicators & Chart Patterns

Deepen your knowledge of technical analysis indicators and hone your skills as a trader.

Find your detailed guides here
Trading Glossary

From beginners to experts, all traders need to know a wide range of technical terms. Let us be your guide.

Learn more
Knowledge Base

No matter your experience level, download our free trading guides and develop your skills.

Learn more
Learn To Trade

Trade smarter: boost your skills with our training resources.

Create a live account
Market Analysis
 
Market News

All the latest market news, with regular insights and analysis from our in-house experts

Learn more
Economic Calendar

Make sure you are ahead of every market move with our constantly updated economic calendar.

Learn more
Technical Analysis

Harness past market data to forecast price direction and anticipate market moves.

Learn more
Live Webinars

Boost your knowledge with our live, interactive webinars delivered by industry experts.

Register now
Special Reports

Engaging, in-depth macroeconomic analysis and expert educational content from our in-house analysts

Learn more
Market Analysis

Harness the market intelligence you need to build your trading strategies.

Create a live account
Partnership
 
Affiliate Programme

Grow your business and get rewarded. Find out more about our Affiliate Programme today.

Learn more
Introducing Broker

ThinkMarkets ensures high levels of client satisfaction with high client retention and conversion rates.

Learn more
White Label

We supply everything you need to create your own brand in the Forex industry.

Learn more
Regional Representatives

Partner with ThinkMarkets today to access full consulting services, promotional materials and your own budgets.

Learn more
Partnership

Plug into the next-gen platforms and the trades your clients want.

Partner Portal
About ThinkMarkets
 
Sponsorships

Check out our sponsorships with global institutions and athletes, built on shared values of excellence.

Learn more
About Us

Find out more about ThinkMarkets, an established, multi-award winning global broker you can trust.

Learn more
Careers

Discover a range of rewarding career possibilities across the globe

Apply now
Security of Funds

Security of your funds is our number one priority. We safeguard our Client funds in top tier banks.

Learn more
ThinkMarkets News

Keep up to date with our latest company news and announcements

Learn more
Trading Infrastructure

When it comes to the speed we execute your trades, no expense is spared. Find out more.

Learn more
Contact Us

Our multilingual support team is here for you 24/7.

Learn more
About ThinkMarkets

Global presence, local expertise - find out what sets us apart.

Create a live account
Log in Create account

Will Fed signal reduction of QE?

Fawad Razaqzada Fawad Razaqzada 28/04/2021
Will Fed signal reduction of QE? Will Fed signal reduction of QE?
Will Fed signal reduction of QE? Fawad Razaqzada
The dollar has sold off ahead of the FOMC meeting with risk assets remaining on the front-foot, although the major US indices came off their earlier highs after the S&P 500 hit a new record. It looks like the markets are positioned for a dovish Fed meeting, which means the bigger move could be in the opposite direction of the current trends in case the Fed surprises.
 
As much as I think the Fed should be starting to prepare the market for asset purchases reduction, I am doubtful it will do so at this particular meeting. The FOMC will likely re-iterate that the labour market slack remains too high, even if the economy is in a better shape than in March and more signs of inflationary pressures are evident. I think the Fed will wait until the June meeting when the FOMC will have the updated economic and inflation forecasts to work with.
 
Still, there is the potential for a hawkish surprise and that’s why bond yields have started to rise again, with investors also easing the selling pressure on the dollar in case the Fed does catch the market off guard. Fed Chair Jay Powell is likely to acknowledge that economic conditions have improved but will probably stop short of providing any clear hints as to when the Fed will actually taper QE. If he sounds more hawkish than expected, then the markets may see that as a sign that the Fed is getting worried about inflation and that it might decide to withdraw support quicker once it starts the tapering process.
 
Inflationary pressures on the rise
 
Indeed, inflationary pressures are building up. We’ve seen big rises in commodity prices such as copper, iron ore and lumber. Prices of soft commodities have also risen sharply with wheat, soybeans, coffee and cotton all pushing higher. Don’t forget that housing costs are on the rise too.
 
With margins tight, producers will likely pass on these raised input costs onto consumers. So it will be only a matter of time before the CPI overshoots the 2% target and there is a risk that inflation could be more sticky than the Fed expects.
 
In fact, by keeping the QE taps wide open, the Fed are only fuelling the fire, which will eventually require faster tightening to put out the flames. Against this backdrop, you would have to think that the US equity markets, especially growth stocks whose yields are low, might struggle going forward.
 
Dollar weakens ahead of the FOMC
 
If the Fed turns hawkish, the dollar is likely to come back strongly, especially against some weaker currencies – those where inflation is not too much of a concern, such as the Japanese yen and Swiss franc. Otherwise, we could see the Aussie and Kiwi joining the Canadian dollar in hitting new highs against the greenback. The pound and euro also look bullish. From a technical point of view and as things stand, things will only turn bullish for the dollar index if it were to form a higher high above  91.42.

DXY
Source: ThinkMarkets and TradingView.com
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice. ThinkMarkets will not accept liability for any loss or damage including, without limitation, to any loss of profit which may arise directly or indirectly from use of or reliance on such information.

Related articles:

RDDT soars: here are the levels to watch in c...

By Alejandro Zambrano

26/03/2024

Reddit Launches IPO: Can the Struggling Compa...

By Alejandro Zambrano

21/03/2024

Non-farm Payrolls: What’s next for USD/JPY an...

By Alejandro Zambrano

06/03/2024

Golden Opportunity? XAU triggers multi-year-o...

By Alejandro Zambrano

04/03/2024

Charting the Course: GBP/USD and AUD/USD Anal...

By Alejandro Zambrano

07/02/2024

Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice. ThinkMarkets will not accept liability for any loss or damage including, without limitation, to any loss of profit which may arise directly or indirectly from use of or reliance on such information.
Back to top