FX.co ★ Overview of the US market (06/17/2021)

US stocks fell on Wednesday after the Federal Reserve announced that they may raise rates earlier than scheduled. Dow Jones slipped 0.85%, while S&P 500 and Nasdaq dropped by 0.5% and 0.2%, respectively.

Some Fed officials said rates may hike as early as 2022, but the official announcement was that interest rates will be increased in 2023.

So for now, rates will remain at 0.125%, while bond purchases will continue to be $ 120 billion per month, at least until inflation rises above 2%.

The Fed also changed its overall forecasts for the US economy, revising it to a 7% increase in GDP this 2021, and a 3.4% rise in inflation. But the central bank stressed that the surge in inflation is temporary, so it will return to 2.1%. As for dollar, the Fed said its rate will increase to 0.6% in 2023, but then drop to 0.1% throughout 2022.

Going back to markets, Japan indices also declined by 0.9% this morning, while China indices, on the contrary, rose 0.15%.

Oil also declined by 0.4%, so Brent is now trading at $ 74. WTI, on the other hand, is holding at $ 71.60. On the bright side, US reserves have declined by 1.6% (7.4 million barrels), so now it is at 466 million barrels.

In terms of inflation, significant growth was observed in many countries. For example, Canada recorded a 2.8% jump in May, which is above the forecast of only 2.4%.

Considering all this, S&P 500 is now at 4.223 points, and is expected to range from 4.180 - 4.260 points. There is a chance that it will grow later because of the upcoming report on the US labor market.

Meanwhile, USDX hit 91.40 points, and is projected to close around 91.00 - 91.60 today. Most likely, dollar will continue to jump in the coming days, if not weeks.

As for USD/CAD, it currently costs 1.2280, but is forecast to trade around 1.2200 - 1.2350. Obviously, the recent dollar rally significantly weakened loonie in the market.

Conclusion: US stocks are driven by the policy decisions of the Federal Reserve. Therefore, its movements today and tomorrow represents investor sentiment.