Fed Optimism "cooled" markets

Anxiety, yet again, has returned to world markets, which, on one hand, is due to the investors' awareness on the American parliament's midterm elections that may take effect on the restoration of the status quo regarding the political struggle between D. Trump and his opponents in the States. If carried out his campaign promises a little bit earlier, it could have led to more difficulties on the implementation, which in turn, will be able to impose an imprint on the prospects of the national economy.

Meanwhile, after Trump's message on social networks about his desire to make a sales proposal to Beijing at the summit in Buenos Aires to be held at the end of this month, some euphoria that manifested itself has declined given the market understanding that the Chinese will not like it and the "battle" on the margins of the trade war will continue with all the negative consequences for the global economy.

On the other hand, another important news sobering investors, which itself was not, was sent to the markets of the US Federal Reserve. Although it was expected that the November routine meeting of the regulator will not be able to present anything new, it still had a significant impact on the investor sentiment, which had shown once again the Central Bank's plan to persistently continue and systematically raise interest rates accordingly.

In our opinion, the above-mentioned factors turned out to be the primary cause of decline in the stock market on Thursday, including the resumption of the fall in crude oil prices and the growth of the US dollar. Given all of these conditions that are happening, the question now goes this way: Will this trend continue to uphold in the near future?

It seems to us that the potential for the continuation of local demand for risky assets may still last until the Central Bank meeting. However, the Fed's determination to continue normalizing monetary policy might minimally reduce this probability. Given this change in sentiment, it can be assumed that the dollar's limited growth might as well continue with all the ensuing consequences for the markets provided that the Fed clearly stated in yesterday's meeting that there will be an expected 0.25% increase in the December meeting, which amidst the resumption of growth yield treasuries and reduction on the regulator's balance will only strengthen its position.

Forecast of the day:

EUR / USD is trading above 1.1345, remaining under pressure due to the global strengthening of the US dollar position. Probably, the pair is possible to recover by 1.1370 through partial profit taking. We consider it necessary to sell it from this mark or after the price drops below the level of 1.1345 with the likely target of 1.1300.

AUD / USD pair is trading above the level of 0.7235 in the markets during the decrease in risk appetite in the markets. Overcoming the price of this level may lead to the continuation of its fall to 0.7190.

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