Fed meeting today - 17.3.2021

On Tuesday, the US dollar index did not change much. American macroeconomic data were weak. However, investors refrained from any active actions before today's Fed meeting. No rate change is expected (0.25%), but the US regulator can make important statements about future monetary policy. For now, the Fed is expected to announce a strong US GDP growth forecast, as well as the possibility of a rate hike from 2023. At the same time, it is likely to retain the volume of the monthly issue for the bonds buyout in the amount of $120 billion. The 10-year US Government bond yield today updated its maximum since February 2020 and is 1.63% per annum. Recall that in early August it was much less and amounted to slightly above 0.5%. The dollar index was 1.7% higher than it is now. In theory, rising government bond yields could support its rate. USDJPY is slightly up today amidst a slight increase in Japan's trade surplus in February (217.4 billion yen). It was less than expected (420 billion yen). Since the beginning of 2021, the yen has fallen by almost 7%. Bank of Japan will hold a meeting early Friday morning to comment on the situation.

There was no single trend on the American stock market yesterday. The Dow Jones and S&P 500 were down, while the Nasdaq rose slightly. Probably, the increase in the 10-year US government bond yields pulls some of the funds out of the stock market. Ford Motor shares fell 5.4%. United Auto Workers criticized the company's decision to build a new plant in Mexico rather than the United States. Yesterday's US macroeconomic data were negative. Retail sales in February lowered by -3% on a monthly basis. This is more than expected (-0.5%). Industrial Production dropped by -2.2% against the forecast of +0.3%. Today, before the Fed meeting, investors expect data on the US residential real estate market for February: Building Permits and Housing Starts.

World oil prices fell slightly on Tuesday for the third day in a row. The EU and a number of other countries have suspended the use of Western Covid-19 vaccines due to side effects. This is a negative factor, as the consumption of motor fuel may decrease. Brent is traded in the range of $66-70 per barrel. Future oil prices will depend on changes in global demand and the success of mass vaccination against coronavirus. According to the American Petroleum Institute, US oil reserves fell by 1 million barrels in a week. This supported oil prices as stocks were expected to grow by 3 million. Today investors expect official stock data from U.S. Energy Information Administration. Note that the volumes of exchange trading of oil have already returned to pre-Covid-19 levels. This was reported by ICE and the U.S. Commodity Futures Trading Commission.