Good Article
Forex How to Adjust to the New Monetary Policy Trajectories:
What was suppose to be a quiet week in the foreign exchange market turned into an
extremely eventful one that saw many major currencies hit new highs against the
U.S. dollar.
There were a few pieces of market moving data (mostly from the Eurozone), but currencies were driven
exclusively by central bank speak. Investors were forced the reassess their positions after Bank of England
Governor Mark Carney and European Central Bank President Draghi turned hawkish. The U.S. dollar, which
experienced broad based losses was a casualty of the fresh opportunities presented by new monetary policy
trajectories. As incoming data confirmed the optimism of central bankers in Europe, U.S. data cast doubt on the
Feds hawkishness leading to a sharp rise in EUR/USD and GBP/USD.
Fed President Bullard (who is not a voting member of the FOMC) vocalized the markets
concerns when he said the Fed is raising interest rates against a backdrop of relatively
weak growth and downside inflation surprises. However Bullard is the minority as many other U.S.
policymakers (including Vice Chair Fischer and FOMC voter Dudley who spoke this week) support Janet Yellens
positive view for the economy. There were some bright spots in U.S. data as well including the uptick in consumer
confidence, smaller U.S. trade deficit, stronger manufacturing activity in the Chicago region, stronger confidence
and upward revision to Q1 GDP growth.
Unfortunately these reports were not meaningful enough to prevent losses in the greenback
leaving investors divided on whether a year end rate hike is truly coming. Before buying what the
Fed is selling, they want to see a significant pickup in job growth and stronger average hourly earnings.
The next non-farm payrolls report (due on Friday) will be a crucial test for the greenback and a deciding factor in
determining whether EUR, GBP, CAD and other major currencies hit new highs. The Fed minutes should be hawkish
but NFPs are the main focus. We expect USD/JPY to trade in a 110.50-113 range ahead of the jobs report and to
breakout if the data impresses or disappoints in a meaningful way.
Forex How to Adjust to the New Monetary Policy Trajectories:
What was suppose to be a quiet week in the foreign exchange market turned into an
extremely eventful one that saw many major currencies hit new highs against the
U.S. dollar.
There were a few pieces of market moving data (mostly from the Eurozone), but currencies were driven
exclusively by central bank speak. Investors were forced the reassess their positions after Bank of England
Governor Mark Carney and European Central Bank President Draghi turned hawkish. The U.S. dollar, which
experienced broad based losses was a casualty of the fresh opportunities presented by new monetary policy
trajectories. As incoming data confirmed the optimism of central bankers in Europe, U.S. data cast doubt on the
Feds hawkishness leading to a sharp rise in EUR/USD and GBP/USD.
Fed President Bullard (who is not a voting member of the FOMC) vocalized the markets
concerns when he said the Fed is raising interest rates against a backdrop of relatively
weak growth and downside inflation surprises. However Bullard is the minority as many other U.S.
policymakers (including Vice Chair Fischer and FOMC voter Dudley who spoke this week) support Janet Yellens
positive view for the economy. There were some bright spots in U.S. data as well including the uptick in consumer
confidence, smaller U.S. trade deficit, stronger manufacturing activity in the Chicago region, stronger confidence
and upward revision to Q1 GDP growth.
Unfortunately these reports were not meaningful enough to prevent losses in the greenback
leaving investors divided on whether a year end rate hike is truly coming. Before buying what the
Fed is selling, they want to see a significant pickup in job growth and stronger average hourly earnings.
The next non-farm payrolls report (due on Friday) will be a crucial test for the greenback and a deciding factor in
determining whether EUR, GBP, CAD and other major currencies hit new highs. The Fed minutes should be hawkish
but NFPs are the main focus. We expect USD/JPY to trade in a 110.50-113 range ahead of the jobs report and to
breakout if the data impresses or disappoints in a meaningful way.
Have an INVESTOR Mindset, but Trade like an ENTREPRENEUR