Boris Schlossberg
BK Asset Management
Market Drivers July 28, 2017
EURCHF continues to fly
Market eyes US GDP
Nikkei -0.60% Dax -0.68%
Oil $49/bbl
Gold $1259/oz.
Europe and Asia:
No data
North America:
USD GDP 08:30
CAD GDP 08:30
USD U of M 10:00
After years of slumber, EURCHF woke up this week, staging multi month highs and taking out the 1.1350 level in Asian session trade today for the first time since its crash more than 2 years ago.
The weakness in the franc is driven by fundamental factors as market is coming to a realization that central bank policy divergence is starting to kick into high gear, The ECB is clearly turning away from quantitative easing as growth in the region improves while the SNB will remain resolutely dovish keeping its interest rates at -75bp for now.
As yields in German bunds rise the EURCHF pair is likely to rise with them. The pair still remains well below the 1.2000 ceiling set by the SNB in 2014 and therefore has plenty of upside left, especially if growth in the EZ region accelerates.
After years of stagnant price action, EURCHF could become an active pair again as macro players and short term specs become attracted to the new volatility, especially because it is thematically based rather than just a function of short term central bank manipulation.
Elsewhere, the focus today will be on US GDP as traders focus on US growth in Q2 of this year. The forecast is for a jump to 2.6% from 1.4% the quarter prior, but the main data point will be real consumer spending which is expected to rise to 2.8% from 1.1% the period prior. A big boost in consumption would validate Fed’s hawkish stance and could put a more sustained bid into the dollar as markets reprice the prospect of higher rates. USDJPY has held the 111.00 several times in overnight trade and a positive GDP reading could push it back towards 112.50 over the near term horizon. However, if number misses the buck’s woes will only intensify and shorts will try to push USDJPY through the 110.00 figure as the day proceeds
Past performance is not indicative of future results. Trading forex carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade any such leveraged products you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading on margin, and seek advice from an independent financial advisor if you have any doubts.
Recommended Content
Editors’ Picks
EUR/USD holds below 1.0750 ahead of key US data
EUR/USD trades in a tight range below 1.0750 in the European session on Friday. The US Dollar struggles to gather strength ahead of key PCE Price Index data, the Fed's preferred gauge of inflation, and helps the pair hold its ground.
GBP/USD consolidates above 1.2500, eyes on US PCE data
GBP/USD fluctuates at around 1.2500 in the European session on Friday following the three-day rebound. The PCE inflation data for March will be watched closely by market participants later in the day.
Gold clings to modest daily gains at around $2,350
Gold stays in positive territory at around $2,350 after closing in positive territory on Thursday. The benchmark 10-year US Treasury bond yield edges lower ahead of US PCE Price Index data, allowing XAU/USD to stretch higher.
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.
US core PCE inflation set to signal firm price pressures as markets delay Federal Reserve rate cut bets
The core PCE Price Index, which excludes volatile food and energy prices, is seen as the more influential measure of inflation in terms of Fed positioning. The index is forecast to rise 0.3% on a monthly basis in March, matching February’s increase.