US Treasury yield has lifted 1.3 bp to 1.64% from the previous close of 1.617%, while the USVIX index jumped over 24 earlier today, and market participants getting ready for the FOMC announcement. With more increase in Bonds yield, market participants are preparing for a less dovish tone if it is not Hawkish.
On the other hand, as long as vaccination progress is going well planned and reopenings are planning, there are ideas that FOMC must start tightening monetary policy.
Helicopter money and holding the dovish policy while yield curve raising will increase the inflation, much more than expected and too far than the standard level. Also, we should not forget that energy price is rising significantly and Oil going through $70, the same level of pre-pandemic. It will cause a higher finished price in production, which gain means more inflation.
Even though Monday, Mrs. Yellen said it is not a big issue, and there are many tools to control the cure if needed, but the market ignored it. Meanwhile, in the Eurozone, the ECB has actually stepped up asset purchases in Monday’s data and seems to be testing the central bank’s resolve to keep spreads in.
USD index
For today, dovish policy or holding the same monetary policy will push the USDIDX higher at the moment in line with stock markets. A less dovish policy or a bit Hawkish tone can play the brake role for Stock markets and USD. Technically and in the H1 chart, the index trading sideways since yesterday, waiting for a clear signal from FED. RSI at 48 and OBV is flat, both confirming the side movement. PP sits at 91.80, and bull needs to pass the R1 at 92.05 while breaching S1 at 91.65 is the gateway for downtrend move.