9 November, 2018
Reinforced expectations over higher interest rates in the United States after the Federal Reserve provided a consistent narrative that policymakers remain committed to “further gradual” rate hikes in the latest monetary policy statement has provided the needed catalyst to support the Dollar. The Greenback is trending higher against the majority of its counterparts in the early hours of Friday at time of writing, including all of the G10 except for the Japanese Yen unchanged or higher against all of the currencies in EMEA except for marginal gains in the Russian Ruble and all of the Asian basket minus the Yen and Indian Rupee.
There are no major surprises from the Federal Reserve decision to be honest because everyone expected interest rates to be unchanged in November, but investors wanted the necessary guidance that the central bank remains committed to the same path of monetary policy that they are expecting until the end of 2019. This is what they received.
What was arguably the most interesting takeaway from the Fed statement is the lack of acknowledgement shown from the central bank regarding the recent levels of global market volatility, which suggests to investors the resilience of the Fed to maintain on course with interest rate hike ambitions.
As we move forward and digest the policy statement further, it wouldn’t be a major surprise to see the central bank divergence story returning to the attention of traders.
This is a possible reason behind the negative momentum seen in stock markets in Asia overnight, despite the initial thoughts that concerns over global growth slowing down and what a potential decline in Chinese economic momentum might possibly mean to the world economy. I would personally put the downturn in stock momentum down to concerns about higher interest rate policy in the United States, and the return of the divergence in central bank story.
Away from the aftermath of the latest FOMC statement, the British Pound is going to attract the attention of international investors as we wrap up the trading week.
The near 2% rally in the British Pound month-to-date rightfully suggests that investors are becoming confident that a Brexit agreement is close to being announced. The theme of a soon-to-be announced Brexit agreement is something that is gaining further steam across media.
I would however point out that this news is getting close to being “priced” into the Pound and potential profit-taking is a risk investor’s need to access.
The British Pound fell yesterday afternoon, after the House of Commons Speaker John Bercow essentially banned Theresa May's Brexit deal from getting a third vote.
Buying sentiment towards Rand has unexpectedly brightened today after official reports showed South Africa's economic growth cooled during...
Asian equity markets entered the trading week on a front foot, following news that the United States and China were close to a breakthrough deal that...
Will the Federal Reserve raise interest rates at all in 2019? This was a question even Fed officials were unable to answer, as the minutes from the FOMCâ€™s January policy meeting revealed.
Emerging market currencies held steady near the end of the week as cautious optimism over the progress of US-China trade talks supported...
Investors in Asia are sitting on the sidelines as they cautiously await the outcome of high-level trade talks between the U.S. and China. With the earnings season...
Sterling dipped on Thursday afternoon before later recovering after the Bank of England warned about the fog of Brexit and its unfavourable impacts on...
Investor appetite to risk remains on the rise today, with equities in green across Asian markets. The slowdown in China's economy will not impact...
Santa arrived a little later than expected this year. At one point investors thought Santa would never show up with markets in red and bears not letting go...