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FX.co ★ 26.05.2022: Fed minutes calm down investors (S&P500, USD, CAD, Bitcoin).

26.05.2022: Fed minutes calm down investors (S&P500, USD, CAD, Bitcoin).

Hi, dear traders! You are watching a red-hot review of how US financial markets are trading. Key stock indices reversed upward in midweek. The Fed’s minutes gave fresh impetus to Wall Street as traders have not discovered a cause for alarm. In this context, major stock indices managed to gain ground. They are trading higher in the New York pre-market. Wall Street indices closed with confident gains yesterday. The Dow Jones closed 0.6% up. The Nasdaq gained 1.5%. The S&P 500 added 1% to close at 3,978. Today the stock market is extending a positive trajectory. Wall Street is trading with cautious optimism, so indices are gradually regaining their footing. The end of the week is packed with important economic data. The S&P 500 is expected to trade in the corridor between 3,920 and 4,030. Stock investors did not find any hawkish surprises in the Fed’s minutes. So, they are taking a break after a long losing streak. The minutes confirmed that most policymakers advocated for a rate hike by 50 basis points in June and July. The market seems to have accepted this agenda. Besides, the possibility of softer policy moves at the following meetings served as a sedative. Some Fed policymakers supported the idea of putting interest rates on hold in the autumn while other members suggested more rate hikes by half a percentage point in September, November, and December. In essence, the market found out that its forecasts were confirmed. Economic conditions remain the same. Hence, we suppose that the market will remain volatile and sensitive to news at least until the end of the week. Back to the stock market. Recently, retailers crashed the Nasdaq, but things are not so pessimistic. For example, Nordstrom upgraded its forecast of quarterly profits which could revive the high-tech sector. Twitter stock rose 5% in the pre-market in light of the news that Elon Musk increased his takeover deal by another 6.25 billion dollars from his own capital. Moreover, satellite companies were overwhelmed by optimism. Pentagon announced its contracts worth billions of dollars. In response, stocks of Maxar and Planet Labs jumped 15% and BlackSky stock surged 104%. On the minus side, Nvidia stock dropped 5.5% in the pre-market after the company unveiled its forecast of dwindling sales of video game chips. Apple stock lost 1.5% because the company was not planning to expand iPhone production rates. All in all, we assume that Wall Street will be able to continue growth for a while. At the same time, the US dollar shed 0.24% yesterday to close at 101.81. The index managed to consolidate at about a one-month low in the pre-market. The intraday corridor for the index is seen between 101.70 and 102.30. The US currency turned sour as the US Fed is not pushing ahead with aggressive monetary tightening. Fed policymakers reckon that after a couple of rate hikes, the regulator will be able to assess the consequences of monetary tightening and adjust its policy to economic conditions. Fed officials admit a pause in rate hikes in the autumn that does not benefit the US dollar. In this context, the bond market is trading on a pessimistic note. Yields of 10-year Treasuries fell to the lowest level since April. As for the economic calendar, some data indicated improvement in the labor market while revised GDP data discouraged investors. The US economy contracted 1.5% on year in the first quarter, a bit worse than the expected 1.4% decline. Imports increased more than expected by 18.3% against 17.7% in the flash estimate. Exports declined a bit less than expected by 5.4% against -5.9% in the flash estimate. Capital investments grew less than in the forecast. Consumer spending rose more than projected. The US Labor Department reported that initial unemployment claims went down by 8,000 to 210,000 last week, more than the consensus of 215,000 new claims. The USD/CAD pair slipped yesterday, though it is still trading not far away from 1.2800. The currency pair is making minor fluctuations between 1.2790 and 1.2870. The trading instrument neglected the Fed’s minutes released yesterday. It is still trapped sideways.

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