The Afternoon Tea of Central Bankers [Video]
|Yes there are many central bank events this week, and yes they all seem to be very important; from FED, BOE to ECB, oh and let us not forget SNB.
But are they?
Is there going to be any surprises? Or is there anything that we haven’t known so far? Because from time to time, I have emphasized the critical difference between speculation and investing. Speculation is all about the market emotions; buy rumors and sell facts. It is about the anticipation and the reactions from market participants to specific events. So let us take a look at them one by one.
FED
The market has priced at 98% of probability for a rate hike, and according to all the previous comments by FED officials, the Dec rate hike is almost 100%.
Does that mean USD will go up? No, it means all the buyers have already gotten in and ready to get out (or probably out already). So does that mean people will sell USD? Not really, because what is the reason for USD to drop after the rate hike? Will we have more rate hikes in 2018? What is going to happen to the economy with the new tax reform bill?
These are the questions that you should learn to ask yourself, as they represent the anticipations and reflections of the buyers and sellers.
BOE
The last hike was perceived as a one time deal, and although Brexit negation seems to be heading into a right stage, what is going to happen in 2018? Is the future for UK suddenly turned to the bright side? Most importantly, what does it have to do with BOE?
Nothing, at least from my point of view. BOE is not in any influential position for Brexit, and unless inflation shoots up again, I don’t expect any surprises in BOE this week.
Finally, for ECB, is Draghi even going to say anything meaningful? I don’t think so, therefore, not a big event to trade.
So you see, although central bankers make decisions to affect the financial market, sometimes they might just get together for a sweet afternoon tea.
"Wait! What about SNB?"
Yeah...what about it?
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