Recall that the head of the most influential FRB in the Fed system surprised everyone at the end of last week when he said that he considered it necessary to more aggressive lower interest rates since all the conditions for this have already been established. Against this background, expectations for a decrease in the key interest rate immediately after the July 30-31 meeting by 0.50% immediately increased sharply, according to the dynamics of futures on Federal funds rates. This led to a local rise in optimism in the markets, accompanied by a demand for risky assets, and a depreciation of the US dollar. But after a spokesman for the Bank said that Williams ' words were taken out of the context of a polemic conversation, the situation changed dramatically. The demand for shares of companies fell and the dollar received support against major currencies. On Friday, a colleague from Williams E. Rosengren reported that he saw no need to lower interest rates and a recorded "dovish" of Fed. Bullard said that he was expecting a reduction of only 0.25%.

The question arises: what was it? In our opinion, the regulator tested the possible market reaction to the final decision of the bank at interest rates. He wanted to understand how investors would react to maintaining the level of interest rates at the previous level, reducing them by 0.25% or a sharp cut-off by 0.50%. It seems that there they made a preliminary decision of reducing the key interest rate by 0.25% would be a kind of compromise solution that would feed the hungry, that is, financial markets and in some way restrains further inflation of financial bubbles.

In our opinion, if the US economy continues to demonstrate ambiguous dynamics, this will continue to restrain an aggressive drop in the Fed rates. Yet, finally, it will be possible to speak on this topic following the results of the regulator meeting, if, of course, he clarifies his position for the future in monetary policy more fully -to the extent possible. In the meantime, before the meeting, we expect markets to continue to react nervously on political and economic events both inside the US and outside.

The economic data and events this week will be interesting with the publication of preliminary values of US GDP for the 2nd quarter and the ECB meeting on monetary policy.

Forecast of the day:

The EUR/USD pair is likely to consolidate in the range of 1.1200-1.1385 before the meeting of the ECB and the Fed and makes a choice in the direction of rising or falling.

The AUD/USD pair is adjusted downward for now, but still remaining in a short-term uptrend. It fell below 0.7040. If it does not rise above it, we should expect it to fall to 0.7000-10.