Friday November 10, 2017 - 18:38:35 GMT
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Continuity In New Fed Chair. The British Pound Bears Watching
John M. Bland, MBA, co-founder, global-View.com
Period Of Calm In Forex Trading? Markets have moved into a quiet period in the latest week as most of the current market uncertainties around the USD have lifted. Money markets are indicating now that a 25bp hike in the Fed Funds target range from 1.00-1.25% to 1.25-1.50% is a near certainty at the December 13 FOMC. Most money market economists are predicting a hike, and Fed Funds futures contracts are placing a near 90% probability on a rate hike at that conference.
Furthermore, the Trump Administration has made its selection for the next Fed Chair for February 2018 when Janet Yellen’s term runs out. Former Fed Governor Jerome Powell will be replacing Janet Yellen next February. The two are said to share similar views on monetary policy, so the Fed should remain on its current cautious rate tightening path. Where they differ is on regulation. Yellen generally has been supportive the Dodd-Frank regulations, whereas Powell is said to have more of a free-market bias. I don’t see Powell as likely to have a strong impact on the financial markets, as anyone coming into this position at the current time is unlikely to want to make waves in the wake of the financial crisis from which the global economy is still emerging. What gives me pause is placing a non-PHD in economics in charge of managing the economy. We have become accustomed to having professional economists at the helm of the Fed. While I appreciate the desire to have a private sector person in charge, I would probably opt for a board certified surgeon to take care of an ailing heart before trying out an expert carpenter. Maybe I’m just old-fashioned?
Cross Currency Flows In And Out of the GBP Worth Watching The British pound has been the subject of a lot of push and pull in the markets as a result of Brexit negotiations an political pressures within Prime Minister May’s Conservative Party. This week saw the resignation of a second member of her government. On Wednesday, International Development Secretary, Priti Patel, resigned her post. There is concern that her government is starting to unravel just as Brexit talks between the EU and U.K. start up again. The current focus is on “divorce” topics. They include finance, EU citizens rights in the U.K. and a “hard” or “soft” Irish border with the North. Also on the table is a possible two-year transitional period following Brexit.
As traders, many of us watch the value of the GBP against the EUR, JPY and USD like hawks. Flows between of these currencies (and others) can have a knock on effect on the value of the USD. The EURGBP pair is traded especially actively as a pair independent of the USD. GBP weakness on concerns about the political stability of the May government can result in flows out of the GBP and into the EUR and indirectly push the EURUSD higher. These flows can shift back and forth on a daily basis. On balance currently, they have been a weight on the unit and therefore bear close scrutiny.
Amazing Trader EVENT RISK Calendar:
Mon 13 Nov
00:00 CA- Holiday
Tue 14 Nov
10:00 GE- ZEW Survey
10:00 EZ- GDP
13:30 US- PPI
23:50 JP- GDP
Wed 15 Nov
09:30 GB- Employment
13:30 US- CPI, Retail Sales
15:30 US EIA Crude
Thu 16 Nov
01:30 AU- Employment
09:30 GB- Retail Sales
10:00 EZ- final HICP
Fri 17 Nov
13:30 CA- Retail Sales, CPI
13:30 US- Housing Starts and Permits
Be sure to refer daily Global-View to see the continuously UPDATED Economic Calendar and the Forex Forum for the complete list of key items (actual data, selected charts, etc.) as they are released.
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