The minutes of the FOMC meeting knocked down the pair USD/JPY, the yield in the US falls

The consequences of yesterday's publication of the minutes of the meeting of the Federal Committee for open market operations differed slightly from the official statement of the FOMC at a meeting in early May. Then the Fed spoke of "symmetry" to describe the goal of inflation. This was probably regarded as an unwillingness to intimidate the market, because it could calculate that the Fed will react too energetically to further inflation growth, because the inflation target of 2.0% is already looming on the horizon.
This time (in any case, judging by the reaction of profitability in the US and the increase in expectations about the Fed's rate hikes), the tone of the protocol was more "dovish", since the Fed apparently agrees to "suffer" a high inflation rate of 2% "long" time, before raising rates further.
The conclusion is that the US central bank seems to be strongly inclined to not cut the recovery period and make sure that inflation remains within the target range.
The very sharp reaction of the US yield in the form of its decline was just as muffled, but this does not apply to the pair USD/JPY, which experienced a new and strong sell-off wave at night, which caused the pair to fall to new local lows and to a level below 110.00. Judging by the dynamics, the level of 110.00 for the pair USD/JPY is too much, and the currency pair could fully rise to high levels if the yield in the USA was also high now.

The UK economy with the weakest growth in five years

The first quarter was extremely negative for the British economy. Throughout it, it has seen its slightest rise in five years, data showed on Monday.
This led to strong fall for the pound against all major currencies.
The UK economy has risen by 0.1%, or at least since the fourth quarter of 2012. The result was well below the average expectations of growth.
The slowdown in construction costs was to a large extent the basis of poor performance. The unconditionally low temperatures and snow in the country since last month have largely contributed to this.
Our initial forecasts for the British economy show that Britain's economy has been rising at its weakest pace in over five years, with a weaker presence in the industry, said Rob Kent-Smith, official government official. And while the snow was partly responsible for this, especially in the construction sector, it was partially offset by increased electricity and online sales, the expert added.
The pound fell sharply against the dollar, losing 0.8 percent of its value to $1.3805 on Monday, or its lowest value since March 9. Investors raised their bets that the British Central Bank would not be able to raise interest rates soon.

GS: Decline between 20 and 25% for US indices with 10-year interest rates at 4.5%

If 10-year interest rates reach 4.5 percent by the end of the year, stocks may see a sharp decline, according to the US investment bank Goldman Sachs Group Inc.
Stress tests made by the bank indicate that raising interest rates to 4.5 percent would trigger a serious fall in indices, according to analyst Danuan Sturvenen. He also commented that under such a scenario, the US economy would likely be seriously delaying, but would hardly get into recession.
An increase in interest rates to 4.5% by the end of the year would result in a 20 to 25% decline in stock prices, the analysis said.
While the recent decline and correction of the indexes are largely predetermined by the rise in 10-year bond yields, interest rates are expected to continue rising to 3.5 or 4%.
A drop between 20% and 25% in indices, from their peak at 2 872.87 points, would mean a drop to around 2 155-2 298 points. The indices ended last week at 2,747.30 points.
The broad US index, however, reached the lowest value of 2 581 points on 8 February.
If Goldman's scenario materializes, that would mean a long way down for the US indices.

Powell: Balance between the risks of overheating and the need to maintain the growth

In one of his first speeches as the Fed leader, Jerome Paul talks about the need to balance between the risks of overheating the US economy and sustaining growth.
This confirmed that Powell would continue to pursue the Fed's policy of smooth interest rates hike, which was also led by Janet Yelan.
The rise in interest rates is expected to become a reality despite the addition of incentives resulting from tax cuts and government spending.
The Fed is expected to raise interest rates three times this year, as Powell made no further comments to drive investors and analysts the view that we can see more increases in interest rates.
The Fed will continue to look for a balance between avoiding overheating and bringing inflation to 2 per cent on an annual basis, Powell said in his first report to Congress as the head of the largest central bank in the world.
Powell commented on the good performance of the world and US economies in particular, as well as the fact that the level of inflation is still below 2%.
According to Powell, a gradual rise in interest rates in the future would be good for both Fed goals - to reduce the risk of overheating and to return inflation to target levels.
The Fed is expected to resort to the first interest rate rise under Powell over the next month.

Fed kept the interest rate unchanged

Fully expected, at its last meeting, as head of the Fed, Yellen and the reserve kept interest rates in the US unchanged, paving the way for their further rise by her deputy. Most likely the next interest rate rise will be made by Jerome Powell in March.
The decision did not have a significant impact on the dollar trading levels, which, after its brief rise at the start of the week, again went down against the rest of the major currencies.
Later this week, Janet Yellen's mandate ends. She will be replaced by President Trump's nominee - Jerome Powell. The latter, also supports the policy of the reserve for a smooth increase in interest rates. Federal interest rates have been raised six times since the end of 2015.
In 2014, Janet Yellen became the first woman to become the head of the Fed. According to a number of magazines, she has even become the most influential woman in the world.

GS: Cryptocurrencies and loans will overshadow US growth (2)

Goldman is not the only financial institution that warns of "red flags" in cryptocurrencies. JPMorgan Chase & Co. executive Director, Jamie Diamond, has already described the bitcoin as a "scam". He said the bitcoin is a "highly speculative asset".
The bitcoin was determined by Japanese central bank chief Haruhiko Kuroda as a speculative tool.
Positive impacts are expected to be in the direction of initial housing, which will continue to have a good impact on the labor market.
The growth in pay for US workers is expected to accelerate and lead to an increase in inflation. The latter is expected to rise from its current levels to 1.5% and to reach 2% target from the Fed.
Markets are expected to start betting for more rapid interest rates next year, GS said. At the moment, two interest rates are pledged, but over time, market participants can expect to see three. And the Fed can surprise them with even more aggressive actions.

The Japanese central bank kept interest rates unchanged

The Japanese central bank kept interest rates unchanged. Members of the Monetary Policy Committee voted 8 to one for this decision.
The central bank also said the economy is growing moderately. And while the inflation rate remains below the Bank's targets, there has been substantial progress in price growth. Central bankers are of the opinion that this trend in inflation will remain.
The central bank's inflation target is at a 2% unreachable level at this stage.
The Japanese economy is growing moderately, the financial institution said in a press release at the end of a two-day meeting at which interest rates were kept at a negative value of minus 0.1%.
Consumer price growth stood at 0.8% in October on an annual basis, following an increase of 0.7% in September. The world's third largest economy is expected to grow 2.5% in the three months to September on an annual basis.
The decision of the Japanese bank did not surprise the market. The dollar continued to trade without any significant change over the Japanese yen after the decision at levels of about 113.42 yen per dollar.

Jerome Powell expects interest rates to rise further

Federal Reserve Chairman Jerome Powell and President Donald Trump's nominee for Fed's head of office expects interest rates to continue rising from their current levels.
According to him, the FED's goal is to maintain a strong labor market and to move inflation to target levels. In this regard, FED expects the interest rates to rise further from their current values ​​and the size of the balance to gradually decrease.
Powell also said that the Fed's objectives would continue to maintain strong financial system, with financial and regulatory reforms being gradually made.
The key question facing Paul is most likely - how the Fed will continue to sustain and stimulate the third longest expansion in US history and how far the planned regulatory relief for the financial system will be stretched.
While Janet Yelan inherited a relatively weak state economy, still aware of the effects of the debt crisis, Powell will inherit a rather strong economy.
Powell also said that if he was appointed to the post, he would continue to support the growth and progress of the economy to full recovery.

The dollar is the cheapest against the euro since September 25th

The US dollar declined to its lowest level since September 25 against the euro, registering a third consecutive weekly loss.
Concerns that the Fed may not respond to the increased market expectations in terms of the numbers of increases in interest rates have largely determined the depreciation of the US currency.
The US continues to face the dangers of low inflation, even though it operates in full employment.
The dollar index fell 0.39%, reaching the lowest value in two months, at 92.781 points. The index was down 0.9% in the past week.
The euro appreciated by 0.7% at the end of last week, reaching a level of 1.1927 dollars, compared to 1.1850 Thursday. This was the first breach of 1.19 by the end of September. The euro appreciated 1.1% last week.

Carney: Brexit will limit the expansionary policy of BoE

Last week, we witnessed an interesting phenomenon - the British Central Bank raised interest rates for the first time in nearly a decade, and the British currency collapsed against other major currencies.
Contrary to logic, as the interest rate rises the national currency, the depreciation of the pound is explained by the expectation that the ECB will not raise interest soon.
A testimony of this was given by Mark Carney's last statement. The head of the central bank said in a special interview that Bexit's uncertainty could actually hurt the British economy in the short term and thus curb the central bank's ability to further raise interest rates.
Carney also warned that Britain's most affected by the interest rate hike would be mortgage lending for the purchase of property. This is very likely to make property in the UK even more inaccessible.
Brexit is only 508 days away, but for most businesses their alarms are set for much earlier, according to market observers. About 10% of British businesses are already slowly starting to reposition their businesses and move their workforce outside of the UK.

P. Harker: Another rate hike this year and three in the next

Fed Philadelphia head Patrick Harker said last week he expects another increase in interest from the reserve and three next year.
This program, however, will largely depend on the performance of inflation, Harker said.
He still signed up for three interest rates next year, but again we need to see how market dynamics is developing, Harker said in an interview with CNBC.
Apparently the comments of the official representatives of the reserve are not convincing enough, as yet a little over half of the market participants expect a third increase in interest rates this year.
We can not fail to note the still low performance of inflation in the world's leading economy. It is at levels below the target of 2%, puzzling seriously the members of the Monetary Policy Committee.
And although Fed officials, in the face of Janet Yelan and Stanley Fischer, have said in the past two weeks that they expect inflation to accelerate over the coming months as a result of low unemployment, inflation has fallen since the beginning year.

Fischer: Soon we will see inflation

The current path of low inflation in the US will not last long, according to Fed Vice President Stanley Fischer.
He still believes we will see higher inflation, Fischer said in an interview with Bloomberg TV.
The fall in unemployment will lead to an increase in wages at one point, and that is to inflation behind, Fischer said.
Fisher's comments are in line with statements by Janet Yelan, who recently said that she expects inflation to gradually rise over time.
Some Fed officials want to first see signs of returning inflation to target 2% before continuing the policy of raising interest rates.
Fischer said he welcomed the gradual rise in Fed interest rates since 2015.
Currently, the level of short-term US interest rates is between 1 and 1.25%. Inflation measured through personal consumption is at a level of 1.3% on an annual basis.

Yellen: The gradual rise in interest rates will continue (1)

Janet Yellen did not surprise the market by saying what everyone was expecting from her. Particulary, the gradual rise in interest rates will continue despite weak inflation.
Yellen's comments continue to indicate problems in predicting inflation in the future, which may be an obstacle to normalizing interest rate policy from the Federal reserve.
It is possible that the Fed has applied incorrect inflation models and failed to take into account key labor market facts, said Yellen.
And while there is still no clear evidence of accelerating inflation to strengthen the position of a gradual rise in interest rates, the central bank must be open to similar action, the most influential business lady said.
The current low inflation most likely reflects factors that will drop over time, Yellen said in a 37-page report.
Without further gradual increases in federal interest, according to her, over time, there is a risk that the labor market will gradually overheat, creating inflationary problems in the future that will be difficult to overcome without bringing a recession.

Will the ECB keep zero interest rates for at least another year?

Europe struggles successfully for the leadership of growth and will gradually shift the US as the engine of the world economy in the second half of the year.
The difference will not be significant, but it shows the advantage of zero interest rates and the cheap euro. The slowdown in US growth does not just come from the process of normalizing of interest rates.
Their change is still insignificant, but the economy is entering the late stage of growth, which will be characterized by a slowdown in investment activity and industry. Consumption remains the most serious factor behind GDP growth, backed by low unemployment and low inflation.
Negative trends in industry and construction do not stop the Federal Reserve in raising interest rates because the slowdown in these sectors is not strong enough. Does this mean that raising interest rates is intended to stop the stock market turning into a bubble? More likely, because the deflationary processes have not passed and the economy does not overheat. In this case, the question arises when the US stock market will become aware of the risks of expensive stocks and of rising interest rates.
According to some analysts, the risks to growth in Europe are much less than the barriers to the US economy. Inflation worries remain in the background, with the European Central Bank holding zero interest rates for at least another year. Political risks are weakening, but tensions between Brussels and London will have economic consequences for both countries, which will gradually increase in 2018.

Shares may collapse unless Yellen produces a miracle

The Fed has confirmed its position that it will begin to reduce its record $4 trillion balance sheet this year. This, however, did not bother particularly the stock markets, as the Dow blue chip index this week set a new record.
Are investors thinking that the Fed can withdraw liquidity from the market without affecting the companies? Obviously yes...
Otherwise, they would have to worry, not to buy shares "as the last one." Investor memory has proven not once and twice that it is short-lived and quickly forgets.
The traders apparently forgot what the asset redemption program is, which is the main reason for the Fed's record balance.
The question arises if the incentives triggered strong and parabolic growth for the indices, why not take the opposite - a reduction in the Fed's balance sheet could lead to a strong correction for US indices?

Fed members disunited

The report of the previous Fed meeting on monetary policy shows a serious disunity amongst the members of the Monetary Policy Committee about the rise in interest rates.
Details of the summit, on which FED voted to raise interest rates indicated that several members of the committee asked the balance of reserve bonds to start declining by the end of August. Others, however, have said that this is more appropriate to be done later this year.
And while most of the FOMC members believe that the observed slowdown in price increase is a temporary phenomenon and a consequence of seasonal and casual factors, some have expressed concern if this is not the beginning of a new trend.
Fed members also seem to be worried why the recent rise in interest rates has not led to a contraction in money supply, and why financial markets have continued to grow.

The Fed's comments sent the gold down

The Fed's comments, which directed investors to another interest rate hike by the end of this year, have seriously damaged the price of gold. Gold registered on Thursday its lowest closing since May 25.
The dollar appreciated against the rest of the major currencies, and with that, the price of gold diminished.
The noble metal lost at one point on Thursday over 1.5% of its value and traded at levels of $1,260 per ounce. Earlier on Friday, the metal continued its decline and traded at $1,252 per ounce.
Traditionally, metals are declining when the Fed resorts to a rise in interest rates. It was precisely such an action that took place on Wednesday, raising the short-term interest rates by 25 basis points to 1.25% on an annual basis.
According to some analysts, the Fed may raise interest rates at least twice more by the end of the year.

Williams: The Fed aims to keep the markets stable

The state economy is close, or the Fed targeted level of full employment and stable prices, said Fed San Francisco head John Williams. Williams also added that the central bank's goal is to ensure the peace of the financial markets, with a gradual return to the normal interest rate policy.
According to the financial expert, the volatility is the last wanted thing to feed.
Employment in the US is at full employment, and inflation is expected to reach 2% target by the Fed by the end of next year. In such an environment, the Fed will most likely continue with its policy of normalizing interest rates. If the reserve does not do that, it risks the US economy "overheating seriously," Williams added.
The Fed raised the interest rate in March for the third time since the end of the financial crisis. Investors expect to witness two more interest rises by the end of this year, one of which is likely next month.
According to Williams, it is normal for the Fed to resort to a reduction in its balance sheet.

J. Boulard: Inflation in the US is growing at an unsatisfactory pace

The current US price hike is lower than what it should be if the Fed wants to reach target inflation of 2%, according to James Bullard, head of the St. Louis reserve.
Bullard commented that prices are currently 4.6% lower than those between 1995 and 2012, when inflation grew by targeted two percent.
Too low inflation was one of the main reasons for the Fed not to raise interest rates in the US more than three times since the big crisis, but since the end of last year, the reserve has seen signs of accelerating inflation.
These views, however, materialized in the expectations of a large number of market participants for three rises in interest rates this year.
Bullard also commented that he expects a minimal impact on long-term interest rates, such as the fall in the Fed's balance sheet, which he hopes will begin in the second half of this year.
Unemployment in the United States is at 4.4% in April, below the Fed's steady levels. Most of the Fed representatives expressed the view that we will see three interest rises this year and inflation may be one of the few brakes for that.

Some fuel for NZD

The Reserve Bank of New Zealand left interest rates unchanged at 1.75% yesterday. Although the central bank felt that the currency needed to fall still further to balance growth, and monetary policy should remain adaptive for a considerable time, officials also said that inflation should grow in the coming months. Now they believe that the consumer price index will return to the goal in the medium term, rather than gradually, and GDP growth in the fourth quarter was weak partly due to time factors. Therefore, their position on the prospects for growth is positive.
RBNZ began to tighten its position in the last few meetings, and therefore I think that the New Zealand dollar should grow. Today there will be data on the trade balance of New Zealand, which can provide support for the currency, as a sharp improvement in the mood of entrepreneurs should lead to increased trading activity.