Forex Today: Fed Sees Inflation & Rate Hikes

Adam Lemon

U.S. Federal Reserve ups inflation and rates forecast sending the USD higher everywhere.

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The yen is a popular asset during turbulent times.

  • Markets are completely dominated by the U.S. Federal Reserve’s monthly release yesterday, in which the FOMC raised its U.S. inflation forecast for 2021 from 2.4% last month to 3.4% now, and expressed its consensus forecast that rate hikes would begin in 2023 not 2024. The release boosted the U.S. dollar, which hit a new 50-day high against the Japanese yen, and rose strongly everywhere. This release looks likely to be a major market-moving event which may well have begun a new long-term bullish trend in the USD, although Jerome Powell has been trying to talk down the prospect of rate hikes since the release, probably in an attempt to rein in dollar strength.
  • Global stock markets are broadly lower since the Federal Reserve’s release yesterday.
  • The USD/JPY is likely to see higher prices over the coming days following its technically significant breakout to new highs. The USD is clearly the strongest major currency right now, while the Japanese yen has the greatest long-term weakness. There is significant short-term weakness in gold, the euro, and the Canadian dollar.
  • New Zealand GDP growth came in much stronger than expected, at an annualized rate of 1.6% compared to the anticipated 0.5%.
  • Australian employment data also came in much stronger than expected, with 115k new jobs created compared to the anticipated 30k.
  • Last week saw a sixth consecutive weekly fall in global new confirmed coronavirus cases and deaths, suggesting that the current wave of the pandemic is starting to retreat. The effects of the vaccination programs in the most developed economies are now being felt.
  • It is estimated that 20.9% of the world’s population has received at least one vaccination against the novel coronavirus.
  • Total confirmed new coronavirus cases worldwide stand at over 177.8 million with an average case fatality rate of 2.16%.
  • The fastest progression in terms of immunizing a population against the coronavirus in all but the smallest states has been in Iceland, Bhutan, Israel, and Canada, which have given at least one shot to between 66% and 63% of their respective populations. For most of the world, a vaccine still remains distant. However, the pace of vaccination in the European Union, which now has immunized 45% of its population, has picked up significantly. In the U.S., 52% of the population has been vaccinated.
  • The rate of new coronavirus infections appears to now be increasing most quickly in Bangladesh, Colombia, Cuba, Fiji, Guatemala, Indonesia, Kuwait (despite its very high level of vaccination), Mongolia, Oman, Panama, Russia, South Africa, Tunisia, Uzbekistan, and Vietnam.
Adam Lemon

Adam Lemon began his role at DailyForex in 2013 when he was brought in as an in-house Chief Analyst. Adam trades Forex, stocks and other instruments in his own account. Adam believes that it is very possible for retail traders/investors to secure a positive return over time provided they limit their risks, follow trends, and persevere through short-term losing streaks – provided only reputable brokerages are used. He has previously worked within financial markets over a 12-year period, including 6 years with Merrill Lynch.
Learn more from Adam in his free lessons at FX Academy

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