Last week several important economic updates influenced the Forex market. US preliminary GDP fell less than expected (0.6% actual vs. 0.7% forecast). Below you will find the key events to trade on during the week from August 29 to September 2.
Greenback keeps diving
On Wednesday, the evergreen buck proceeded with its dive, with the USD index losing 0.5% versus its major counterparts because the outcome of a split American Congress backed hopes that any key American fiscal policy boost to the US economy can hardly occur now.
In 2018, in the foreign exchange market, the evergreen buck has appeared to be the surprise winner on the back of Donald Trump's fiscal stimulus as well as firm economic data that has made the Fed announce higher interest rates.
However, market watchers are assured that the outcome of the American midterm, including Democrats taking the House and also Republicans controlling the Senate, makes any further American policy boost problematic. US leader’s policies might also come under enormous scrutiny, powering fresh political uncertainty.
The likelihood of less fiscal stimulus would also diminish the pressure on the major US bank to keep lifting interest rates and also apply downward pressure to US Treasury gains and the evergreen buck. Across the board yields on American debt dived 3 to 5 basis points.
Meanwhile, swap markets currently expect nearly 65 basis points in cumulative rate lifts until September next year, although traders are assured that it might dive further if bond gains extend their dive.
Versus a basket of its counterparts, the evergreen buck dived by 0.5% hitting 95.758, which is its lowest value for more than two weeks. Additionally, the profit on 10-year American Treasury debt headed south by four basis points reaching 3.18%.
Notwithstanding the prospects of greater American political uncertainty in the short term, stock markets managed to ascend on expectations that the reduced likelihood of more fiscal stimulus would conclude a multi-year American rate lift cycle.
High-yielding currencies, including the Australian dollar as well as the New Zealand dollar didn’t lose, while safe-haven currencies, including the Swiss franc and the Japanese yen dipped.
Last week, there were sharp swings in USDJPY, a decline in oil prices, and a surge in Tesla stock. What's next?
Geopolitical factors and inflation remain the main drivers of financial markets. Let’s see how to use that in trading!
Main news that will drive the market in the upcoming week include CB Consumer Confidence Index, Canadian GDP, and US Core PCE Price Index
The Federal Reserve (Fed) will announce its Interest Rate Decision and make a statement about the future monetary policy on Wednesday, September 21, GMT+3. After the higher-than-expected inflation numbers published on September 13, there’s almost no doubt the Federal Reserve will come up with another 75-basis-point rate hike. However, surprised by the CPI numbers, several Fed members announced the possibility of a 100-basis-point rate hike on Wednesday.
Every week we expect many interesting events that can shake the market.