Six Reasons For The Fed To Smile This Week

The Federal Open Market Committee (FOMC) will announce its policy decision on Thursday, March 17th (02:00) in Beijing, and will also announce its updated quarterly economic forecast and future policy outlook.

Yellen, chairman of the US Federal Reserve (FED), will hold a news conference at the following 02:30 in Janet. (Yellen)

The dollar week was basically flat at the beginning of the Sanya market, and the market was waiting for the fed to give new guidelines.

Beijing time 08:47, the US dollar index was 96.69, a steady recovery after a 95.94 month low of 95.94 on Friday.

"FOMC is the focus of the next 24 hours. We still believe that the next increase in interest rates is likely to be in June. There is reason to believe that the Federal Reserve will further raise interest rates in the second half of 2016," an analyst at ANZ said in a customer report.

However, this prospect still depends on the performance of the data.

"The market now expects that the probability of action by the Federal Reserve at the end of April will be 25%, the probability of taking action at the conference in June and the probability of meeting in November will be 100%," said Steven Englander, global head of Citigroup foreign exchange strategy (CitiFX) G10 foreign exchange strategy (Steven).

"Risk assets are rising well, but now they are starting to push up interest rate expectations," said Vassili Serebriakov, a strategist at BNP Paribas in Paris, New York. "Now that the Fed's tightening policy is expected to be reabsorbed, the risk appetite is slightly more cautious."

The Fed raised its first interest rate increase in nearly 10 years last December. However, since the beginning of this year, the impact of the slowdown in China and Europe on the US economy has been uncertain, prompting the Fed policymakers to not raise interest rates further thereafter.

However, the recent series of strong US data, including better employment growth than expected in February, has eased the worries of the past few weeks, leaving people no longer worried about the adverse factors overseas and the tight financial environment they are causing in the United States, which may derail the economic recovery.

Analysts said that when the meeting was held this week,

At least five things are emotionally satisfying - stock market recovery, dollar weakness, rising inflation, declining initial jobless claims, rebound in oil prices and monetary easing in the ECB.

1. recently released economic data eased the doubts about possible US recession and helped the S & P 500 index rebound 11% since mid 2.

In the past two weeks, a global stock index has risen by nearly 5%, rising nearly 10% in the past four weeks.

So far, the ICE dollar index has fallen by nearly 2% in 2.3 months, possibly the worst monthly performance since last April.

3., since the last meeting of the Fed, the United States

Signs of stabilization have been shown.

An inflation index released by the Dallas fed rose to 1.9%, the closest to the Federal Reserve's 2% inflation target in two and a half years.

A report released in February 26th showed that the annual rate of core inflation of food and energy in January rose by 1.7%, an increase of 1.6% over the Fed's forecast for the end of this year.

As the pace of achieving the 2% inflation target is getting closer, Stanley Fischer, the US Federal Reserve Chairman, said last week that "we are not far from achieving the goal" and inflation will rise after the US dollar and oil prices stabilize.

A government report on 4.3 may said that the number of unemployed Jin people dropped sharply last week after a quarter of last season, and hit a low level for five months, suggesting that the country's unemployment rate is 10.

Strong recovery is still maintained.

According to the data released by the US Department of labor, the number of initial jobless claims decreased by 18 thousand to 259 thousand in the United States in March 5th, the lowest level since mid December last year, with a correction of 277 thousand.

5., affected by oversupply, international oil prices hit the lowest level since 2003, breaking below 30 US dollars / barrel in January.

But with Saudi Arabia, Qatar, Venezuela and Russia reaching an agreement on output freeze, rising confidence has driven oil prices back above $40 a barrel.

6. the ECB lowered all three interest rates last week, expanded the scale of asset purchases and decided to buy corporate bonds, aiming to boost the economy and prevent ultra-low inflation from becoming a deep-rooted chronic illness.

Analysts pointed out that a series of positive US economic data and stock prices have eased the Fed's worries recently, while the depreciation of the US dollar and rising oil prices will help to push up inflation.

In addition, the radical easing of the European Central Bank helps to stabilize the market, which is also a favorable factor for the fed to raise interest rates.