Central bankers drive markets this week

25 September, 2017

Merkel has secured her fourth term as German chancellor, but politics in Europe’s largest economy is becoming more complicated. When Macron won the French presidency by a decisive margin over Le Pen, many investors thought that this is the end of the populist tide. It seems they were wrong. The rise of a populist far-right alternative for Germany, is getting much attention after securing more than 13% of the votes. This does not only secure enough seats for AfD in the Bundestag, but it also makes them the third largest party; this will no doubt make things more complicated for the chancellor. Merkel now should form the first three-party coalition, after SPD decided to go into opposition and this is not likely to happen overnight. Given that the election results were expected, the impact on the Euro was not very powerful. EURUSD fell initially 60 basis points and then recovered half of its losses. However, the noise out of Germany in the next couple of weeks, will likely lead to some volatility and probably a further correction in EURUSD towards 1.17-1.18. I would see a significant correction as an opportunity to build long positions, based on continued improvement in the EZ economy and central banks conversion. 

The Kiwi was under even greater pressure early Monday, falling more than 1% against the USD. Although as expected, the National Party won the largest number of votes, similar to Germany's position; it is not enough to gain a majority in the parliament and this may lead to some anxiety amongst investors. Forming a coalition will also take time and will most likely keep NZD under some pressure.

The announcement from the Federal Reserve last Wednesday, that it would begin unwinding its balance sheet and is keeping the option of another US interest rate rise in 2017 on the table, is still encouraging buying demand for the Dollar.

Chair, Janet Yellen, is scheduled to speak on Tuesday at the 59th NABE Annual meeting, to further discuss her views on inflation, uncertainty, and monetary policy. She is among many Fed speakers,  who will share their thoughts after a hawkish statement. Given that there were no economic or fiscal policy surprises since the last Fed’s decision, I think we will get more hawkish rhetoric. Thus a shift in market sentiment is unlikely to occur. ECB’s Mario Draghi, BoE’s Mark Carney, and BoC’s Stephen Poloz, are also set to speak on different occasions this week.

Investors will be more concerned about President Trump’s announcement in Indiana on Wednesday. There are high expectations that he would provide critical details on tax reforms. The only leaked information so far is that the corporate tax can be lowered from 35% to 20%. This is still higher than what Trump has hoped for, but if legislations are passed before year-end, it will still be good news for equity markets.

Source link  
Yuan firms on Dollar weakness

Global investors will likely remain on high alert throughout the end of the week to see if the largest market sell-off since early 2018 will...

EM currency weakness refuses to go away

Tuesday has seen stability in Chinese markets following a very nervous beginning to the new trading week yesterday. Signs of China market stability...

Yuan eases on risk-off sentiment

Financial markets have entered the new trading week on negative footing as a mixture of different market themes weigh on investor sentiment...

Risk assets under pressure from rates

Chinese equities took a big hit after traders returned from a week-long holiday. Efforts by the People's Bank of China to free more than $100 billion...

U.S. Treasury Yields boost the greenback

The U.S. Treasury selloff on Wednesday was the biggest story in the financial markets. This time it wasn't only the rate-sensitive two-year yields that marched higher...

NAFTA deal fails to lift global risk appetite

Global investors remained defensive on Tuesday despite the U.S. and Canada agreeing to a new trade deal ending months of uncertainty...

Dollar steady after Fed raises rates

In a widely expected move, the Federal Reserve has raised its key interest rate by 25 basis points for the third time this year. The central bank...

Markets prepare for Fed meeting

The resumption in concerns around trade uncertainties, the upcoming Federal Reserve policy meeting and general political risk element that...

Could the Dollar be turning the corner?

Currencies throughout Asia have welcomed the news that the Dollar has tumbled to a near 3-month low. A number of different currencies in the...

In the past 24 hours Bitcoin has gained 4.94% and reached $6643.63464483. Open your trading account with the best cryptocurrency brokers on special terms today.

In the past 7 days the EUR/USD pair has gained 0.5919% and is now at $1.1596. Start trading and making money on Forex today.

In the past 7 days Ethereum has lost -8.85% and is now at $209.098738374. Have the most popular cryptocurrencies compared online 24/7.

Top Brokers offering Forex Market Analysis

Forex Currencies Forecasts

Top 10 Forex Brokers 2018

# Broker Review
6FIBO GroupFIBO Group84%