Obviously, all attention will be fixed to the upcoming Fed conference, during which the decision on monetary policy will be announced. But everyone already expects the central bank to maintain its current super-soft policy and ignore the ongoing growth in Treasury yields. Aside from that, quarterly economic forecasts will also be released, which will indicate how much Fed members are committed to its soft policy despite a possible strong inflationary jump in the near future.
Most likely, the committee will keep interest rates near zero and the volume of bond purchases unchanged at $ 120 billion a month. But adjustments may begin by 2023 since many are already expecting that the US economy has recovered enough by then. Nevertheless, not changing the policy right now ensures the continuation of a bullish trend for the dollar, while a change in the policy, for example, an increase in the Fed's bond buying program, guarantees a slowdown in Treasury yields, which, in turn, will weaken the position of USD.
Jerome Powell's term as chairman of the Fed end in February 2022, but many expect US President Joe Biden to offer him to stay for a second term.
On a different note, President Biden once again proposed a new stimulus program for the US economy, which sparked heated debates among Republicans. Apparently, they do not understand where the fund will come from, so they remain unyielding on the package. But Biden is really hoping for the backing of GOP members since the program plays a very important role in his long-term economic plan.
Unlike the recently-approved $ 1.9 trillion bailout bill, the new program will be even more ambitious and will not rely solely on public debt as a source of funding. Serious financial investments are planned in the construction of roads and bridges, as well as to support the labor market and business. However, Republicans have expressed a clear disagreement on these, since the funds needed will certainly fuel debt and debt burden.
With regards to statistics, a report on US retail sales was published yesterday and it indicated a much larger decrease than expected. The US Department of Commerce said the index fell by 3.0% in February, after rising by 7.6% a month earlier. Analysts had expected the figure to fall by only 0.5%. The sharp decline was observed in all areas, from the sale of cars and parts, which fell by 4.2%, to sales in department stores. But excluding auto, building materials and catering, retail sales fell by 3.5%.
Most likely, the decrease is caused by the reduction in demand amid bad weather conditions. But it should recoup since figures will surge again because of the new stimulus bill.
Sadly, industrial production dropped as well this February, after increasing in the previous month. According to the latest report, the index fell by 2.2% due to disruptions caused by bad weather conditions. But by March, all indicators should recover.
The Fed also reported that industrial capacity utilization dipped to 73.8% this February, from 75.5% in January. Analysts had expected the figure to increase to 75.8%.
Housing index also declined to 82 points in March, after jumping to 84 points a month earlier. Analysts had expected the index to fall to 83 points.
"While builders continue to see a strong influx of buyers, recent increases in material costs and delivery times have dampened the sentiment this month," said NAHB Chairman Chuck Fowke.
Import prices also rose by 1.3% in February, but fortunately did not affect the market much. At the same time, export prices also increased, but it is only by 1.6%, which is obviously lower than the 2.5% jump on the previous month.
As for the EUR/USD pair, the key level for today is 1.1885 so a break below it guarantees a strong decrease towards 1.1835 and 1.1750. But if the euro returns to 1.1990, the pair could climb again to 1.2050 and 1.2110.
