Boris Schlossberg
BK Asset Management
Market Drivers May 26, 2017
USDJPY takes out 111.00
Cable under pressure on weak Tory polls
Nikkei -0.64% Dax -0.34%
Oil $49/bbl
Gold $1266/oz.
Europe and Asia:
JPY CPI 0.3% vs. 0.4%
North America:
USD GDP 8:30
USD PCE 8:30
USD Durable Goods 8:30
USD U of M 9:50
The dollar was mixed on the last trading day of the week ahead of key US GDP and inflation data due 12:30 GMT. The greenback was markedly weaker against the yen with USDJPY dropping below the 111.00 figure but stronger against cable which approached the 1.2850 mark in morning London trade.
Sterling was beset by its own woes as the latest batch of polls from UK indicated that the Tory lead had evaporated to a mere 5% with two week to go before election. UK polls are notoriously inaccurate but the news nevertheless sent the markets scrambling with cable offered all night long.
Prime Minister May made a calculated decision to call early elections in hopes of winning a supermajority in Parliament so that she could have a strong hand in Brexit negotiations. However a series of missteps over the past few weeks have turned public opinion against her. Her ability as a politician is sorely tested and should the Tories lose it would be one of the most remarkable political failures in recent memory.
By all accounts Tories are still likely to win a majority in Parliament, but if their standing is actually weaker Ms. May will have managed to snatch defeat from the jaws of victory and that no doubt could impact cable negatively.
With elections only two weeks away the markets will now begin to pay close attention to polling and sterling could become more volatile as a result. For now the pair has topped at the 1.3000 level which will remain key resistance for time being.
In North America today, US data could hold the key to USDJPY direction. Today's US PCE inflation reading will be must watching for the FX market. The Fed has been concerned about the slugging pace of inflation and it may be the one variable that prevents the FOMC from hiking rates three time this year. Last night SF Fed Chief Williams reiterated his view that three more hikes in 2017 are appropriate, but he is in the minority and if the core PCE reading dips below the 2% level, USDJPY could see a vicious selloff as US rates compress further.
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 fluctuates near 1.0700 after US data
EUR/USD stays in a consolidation phase at around 1.0700 in the American session on Wednesday. The data from the US showed a strong increase in Durable Goods Orders, supporting the USD and making it difficult for the pair to gain traction.
USD/JPY refreshes 34-year high, attacks 155.00 as intervention risks loom
USD/JPY is renewing a multi-decade high, closing in on 155.00. Traders turn cautious on heightened risks of Japan's FX intervention. Broad US Dollar rebound aids the upside in the major. US Durable Goods data are next on tap.
Gold stays in consolidation above $2,300
Gold finds it difficult to stage a rebound midweek following Monday's sharp decline but manages to hold above $2,300. The benchmark 10-year US Treasury bond yield stays in the green above 4.6% after US data, not allowing the pair to turn north.
Worldcoin looks set for comeback despite Nvidia’s 22% crash Premium
Worldcoin price is in a better position than last week's and shows signs of a potential comeback. This development occurs amid the sharp decline in the valuation of the popular GPU manufacturer Nvidia.
Three fundamentals for the week: US GDP, BoJ and the Fed's favorite inflation gauge stand out Premium
While it is hard to predict when geopolitical news erupts, the level of tension is lower – allowing for key data to have its say. This week's US figures are set to shape the Federal Reserve's decision next week – and the Bank of Japan may struggle to halt the Yen's deterioration.