As we mentioned yesterday this week is all about the dollar and then sterling. For today, the focus is on both. For the dollar, it’s with the start of the two day Fed meeting, with results announced tomorrow evening. The main focus is on the statement and the potential for a change in language, which could prove to be another boon for the dollar if seen. Before then, inflation data in the UK is seen at 08:30 GMT and is expected to fall further to 1.5% (from 1.6%) on the headline rate. But this will be a side-show to the main event of the week on Thursday, with the referendum on Scottish independence the results of which should be seen early Friday. With the result still too close to call, sterling volatility is assured, with the options market reflecting this in the elevated levels of implied volatility, especially on the shorter maturities.
Sterling has moved below the 1.62 level in early trading, with the dollar generally firming on the majors. AUDUSD is once again flirting with the 0.90 level, with 107.39 still in the sight-lines on USDJPY (a six-year high). The other point to note is the underperformance of emerging market currencies so far this month, with the Russian rouble, Brazilian real and South African rand leading the way on the downside. Emerging markets were always seen as vulnerable to the Fed moving towards a tightening stance and even though we are some way off from that, we’ve already seen the reaction in the interest rate markets, with US bond yields rising, pushing the 2 year yield close to the highs of the year. So far though the reaction has been relatively muted, in comparison to the scare that perpetrated emerging markets May to early September of last year when the market had its first scare on Fed tightening (tapering). The subsequent indications and language have served to soften the blow, but the recent moves suggest it cannot be totally eliminated from emerging market currencies.
FxPro UK Limited is authorised and regulated by the Financial Services Authority, registration number 509956. CFDs are leveraged products that incur a high level of risk and it is possible to lose all your capital invested. Please ensure that you understand the risks involved and seek independent advice if necessary.
Disclaimer: This material is considered a marketing communication and does not contain, and should not be construed as containing, investment advice or an investment recommendation or, an offer of or solicitation for any transactions in financial instruments. Past performance is not a guarantee of or prediction of future performance. FxPro does not take into account your personal investment objectives or financial situation. FxPro makes no representation and assumes no liability as to the accuracy or completeness of the information provided, nor any loss arising from any investment based on a recommendation, forecast or other information supplied by any employee of FxPro, a third party or otherwise. This material has not been prepared in accordance with legal requirements promoting the independence of investment research and it is not subject to any prohibition on dealing ahead of the dissemination of investment research. All expressions of opinion are subject to change without notice. Any opinions made may be personal to the author and may not reflect the opinions of FxPro. This communication must not be reproduced or further distributed without the prior permission of FxPro. Risk Warning: CFDs, which are leveraged products, incur a high level of risk and can result in the loss of all your invested capital. Therefore, CFDs may not be suitable for all investors. You should not risk more than you are prepared to lose. Before deciding to trade, please ensure you understand the risks involved and take into account your level of experience. Seek independent advice if necessary. FxPro Financial Services Ltd is authorised and regulated by the CySEC (licence no. 078/07) and FxPro UK Limited is authorised and regulated by the Financial Services Authority, Number 509956.
Recommended Content
Editors’ Picks
EUR/USD edges lower toward 1.0700 post-US PCE
EUR/USD stays under modest bearish pressure but manages to hold above 1.0700 in the American session on Friday. The US Dollar (USD) gathers strength against its rivals after the stronger-than-forecast PCE inflation data, not allowing the pair to gain traction.
GBP/USD retreats to 1.2500 on renewed USD strength
GBP/USD lost its traction and turned negative on the day near 1.2500. Following the stronger-than-expected PCE inflation readings from the US, the USD stays resilient and makes it difficult for the pair to gather recovery momentum.
Gold struggles to hold above $2,350 following US inflation
Gold turned south and declined toward $2,340, erasing a large portion of its daily gains, as the USD benefited from PCE inflation data. The benchmark 10-year US yield, however, stays in negative territory and helps XAU/USD limit its losses.
Bitcoin Weekly Forecast: BTC’s next breakout could propel it to $80,000 Premium
Bitcoin’s recent price consolidation could be nearing its end as technical indicators and on-chain metrics suggest a potential upward breakout. However, this move would not be straightforward and could punish impatient investors.
Week ahead – Hawkish risk as Fed and NFP on tap, Eurozone data eyed too
Fed meets on Wednesday as US inflation stays elevated. Will Friday’s jobs report bring relief or more angst for the markets? Eurozone flash GDP and CPI numbers in focus for the Euro.