Next Week, How To Split The Federal Reserve Is The Key.

No one would have thought that Delaki had "put all his eggs in one basket" last night, but this did not frighten the euro, but created a "reversal market" which surged more than three hundred points.

On Friday (March 11th), the euro / dollar recovered from "madness" and the financial market became calm.

The view of market investors has shifted to next week's FED policy meeting.

Since Mr Draghi has launched a "bombing of the king", how to dismantle the Federal Reserve will become the focus of the market.

The European Central Bank (ECB) surprised the market last night. Dragaki threw out the "loose combination of comparable Royal explosion", including lowering the three interest rate, expanding the scale of QE (quantitative easing) and extending the QE period, and launching a new directional long term refinancing operation (TLTRO).

The European Central Bank announced that it would reduce the main refinancing rate from 0.05% to 0%, reduce the interest rate of the deposit mechanism from -0.30% to -0.40%, and reduce the marginal lending rate from 0.30% to 0.25%.

At the same time, the European Central Bank expanded the QE scale to 80 billion euros per month.

The central bank also expands the scope of QE's qualified assets, which will include non bank bonds.

In addition, the European Central Bank also announced the implementation of the new directional long term refinancing operation (TLTRO), with a term of 4 years, which began in June 2016.

This is probably the most spectacular easing of the European Central Bank in recent years, but it really can boost inflation and the economy in the euro area. There is still a big question mark in the market.

On the one hand, relying solely on the central bank's monetary policy, it is difficult to reverse the current weakness of the euro area as a whole.

Ilmars Rimsevics, a member of the European Central Bank's management committee, said that the revitalization of the euro zone economy should not rely solely on the actions of the European Central Bank.

Rimsevics said on the public television channel in Latvia that the euro area needs other policy contributions, such as increasing competitiveness and structural reform.

He said, "there is no good medicine anymore."

On the other hand, the European Central Bank may have "cleaned up all bullets", without the risk of leaving behind, if the new problems in the euro area erupt, how will Europe bank deal with it?

After Delaki said, "the ECB is not expected to further cut interest rates, and the central bank decided not to set up a two level interest rate system", the market soon realized this concern.

This has also created the "big reversal" of the euro.

The euro / dollar rebounded to more than 300 points, once at 1.1209.

Intraday exchange rate volatility dropped, hitting 1.1109. lowest

Aurelija Augulyte, an analyst at the Nordic Union Bank (Nordea), said

The central bank's move has exceeded expectations, and the euro will be soft. It is estimated that the euro / dollar will fall to 1.07 in 1 months. This prediction depends on the FED's response and future decisions, and doubts about the impact of the ECB's decision on the euro area's real economy.

ActionForex, a well-known foreign exchange website, pointed out that only when the euro / dollar broke through the 1.1067 resistance level, the party indicated a reversal in the recent downtrend.

Otherwise, even if there is a rebound, the euro preferences will remain bearish.

He added: "if the euro / dollar falls below 1.0825, it will restart the overall decline since 1.1376, when the target will point to the key support area of 1.0461/0517."

Axel Rudolph, a senior analyst at Commerzbank, said: "the reversal trend of the euro / dollar has prompted us to turn its weekly stance down to neutral. This means that the resistance line of 1.1319 months and the high level of 1.1377 in February are beginning to enter the long line of sight.

If the exchange rate breaks through the above resistance, it will further look at the September and October high 1.1460/95 levels.

The European Central Bank threw out the "bombing". Next week, it is the FED policy meeting that responded. In the context of the expected rate hike in March, will Yellen pass the signal of raising interest rates in April to the market?

Next Thursday (March 17th) at 02:00 a.m. Beijing time, the Federal Reserve will announce interest rate decisions and issue policy statements.

Later, 02:30, Federal Reserve Chairman Yellen will chair the media briefing.

From the expectation of the US federal funds interest rate futures market, the market expects March.

The probability is only 4%, and the probability of raising interest rate in April is 19.4%.

Economists surveyed by Bloomberg expect the Federal Reserve to keep interest rates unchanged next week. 55% of economists expect to reiterate the wording of the January statement that officials are "assessing" global economic and financial dynamics.

This will be seen as a lower probability of raising interest rates in April.

Another survey showed that about 27 of the 44 economists interviewed said they expected the Fed officials to raise their outlook for the economy to "near equilibrium" so that investors might turn their attention to the June FOMC conference.

At the same time, 16% of economists believe that the Fed will recognize the stability of recent economic data and show the risk of "balance", thereby retaining the possibility of raising interest rates in April.

Stephen Stanley, chief economist of Amherst Pierpont Securities LLC in New York, said this position of risk balance has changed.

A part of the forward-looking guidance.

Looking at the current US economy, employment recovery is still stable and inflation is showing signs of rising. This may make the Fed more emboldened in tightening monetary policy.

Michael Hanson, senior global economist at Bank of America Corp. in New York, said: "the job market is improving, the strength of the dollar has weakened, and oil prices seem to be at the bottom.

I doubt that their arguments will be positive and healthy, but there will be no clear conclusions about inflation. "

If the Fed really sends a signal of hope for raising interest rates in April, it will certainly strengthen the expected increase in interest rates during the year, and the US dollar is expected to be supported.

In the intraday European market, the US dollar index slowed slightly from the overnight slump, and the exchange rate rebounded to the 96.60 level in the short term.

In a recent report, David Bloom, global head of HSBC's foreign exchange strategy, bluntly pointed out that the dollar bull market has become a fundamental thing in the past.

Bloom said in an interview with foreign media in Istanbul, "the situation of the excessive rise of the dollar is bound to repeat itself as a result of the comprehensive normalization of policies. I think we are witnessing this situation.

By the end of this year, we expect the long-term yield of US Treasury bonds to be 1.5%, and the US Federal Reserve (FED) will raise interest rates two times.