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EURUSD hovers around 1.1800 - AM Briefing
29 Sep 2017
Trump tax reform lifts Wall Street - AM Briefing
28 Sep 2017
What is the Fed trying to tell us? - PM Bulletin
27 Sep 2017
Yellen struggles with inflation - AM Briefing
27 Sep 2017
Can cable’s rally continue? - PM Bulletin
26 Sep 2017
Investors jittery after North Korean threat - AM Briefing
26 Sep 2017
EURUSD slips again - PM bulletin
25 Sep 2017
Merkel scrambles to form coalition - AM Briefing
25 Sep 2017
Caution ahead of weekend - AM Briefing
22 Sep 2017
Fed Meeting Post-Mortem - Video Update
21 Sep 2017
Fed signals another rate hike - AM Briefing
21 Sep 2017
Trading subdued ahead of Fed meeting - Video Update
20 Sep 2017
Fed expected to reduce balance sheet - AM Briefing
20 Sep 2017
FOMC and balance sheet reduction - PM Bulletin
19 Sep 2017
Dow hits fresh record high - AM Briefing
19 Sep 2017
EURUSD continues to trend higher - PM Bulletin
18 Sep 2017
Global indices storm higher - AM Briefing
18 Sep 2017
Investors shrug off NK missile test - AM Briefing
15 Sep 2017
Sterling soars after BoE meeting - Video Update
14 Sep 2017
Bank of England meeting in focus - AM Briefing
14 Sep 2017
Look-ahead to the BoE monetary policy meeting - Video Update
13 Sep 2017
Sterling bounces as inflation picks up - PM Bulletin
12 Sep 2017
Wall Street rally lifts sentiment - AM Briefing
12 Sep 2017
Euro storms higher - AM Briefing
08 Sep 2017
ECB meeting in focus - AM Briefing
07 Sep 2017
EURUSD soars during Draghi’s press conference - Video Update
07 Sep 2017
ECB meeting, a look-ahead to Thursday - Video Update
06 Sep 2017
Wall Street wobbles, but closes off lows - AM Briefing
06 Sep 2017
WTI recovering as clean-up continues - PM bulletin
05 Sep 2017
Investors shrug off North Korean threat - AM Briefing
05 Sep 2017
North Korean nuclear test boosts gold - PM Bulletin
04 Sep 2017
North Korea rattles markets - AM Briefing
04 Sep 2017
High hopes for the latest US jobs release - AM Briefing
01 Sep 2017
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 Friday 29 September 2017

EURUSD hovers around 1.1800 - AM Briefing

 

 

Early moves

·         US dollar has a solid week

·         Investors looking for further Fed rate hikes

The US dollar has put in a solid performance this week but has pulled back from its best levels. This has seen the Dollar Index drift back below 93.00 while the EURUSD popped back above 1.1800 earlier this morning. This could be little more than profit-taking and position squaring ahead of the weekend rather than a resumption of the weak dollar trend that’s been in place since the beginning of the year. However, it’s still too early to tell if the greenback has turned a corner and is set to rally.

Investors appear to be taking the Federal Reserve’s FOMC at its word. Last week’s key Fed meeting saw the FOMC release its quarterly “dot plot.” This suggested that the FOMC could raise rates by 100 basis points between now and the end of 2018. That would certainly be dollar-positive, especially as the ECB seemed reluctant to tighten itself. However, the FOMC’s “dot plot” forecasts can often be wide of the mark, as Janet Yellen pointed out earlier this week. So perhaps we should be wary of reading too much into the latest prediction.

Stock Index Update

·         Russell 2000 hits record high

·         US equity rally continues

All the US majors closed higher last night and this included the “small cap” Russell 2000 which ended at an all-time record close. The Russell is a broad-based index of US corporations, many of which are more domestically focused than those in the Dow, S&P500 or NASDAQ100. As such, it is a good measure of investor confidence in the US itself. The feeling is that these corporations are set to benefit from the Trump administration’s proposals for tax reform, in particular the corporation tax cut. Commentators are also spinning the US Federal Reserve’s apparent hawkishness as a positive for US equities. The thinking goes that the Fed’s willingness to tighten monetary policy further is an indication of its faith in the strength of the US economic recovery. This is true to some extent. However, this seems like little more than an excuse to explain away a market that remains in a strong uptrend. After all, if loose monetary policy and quantitative easing was responsible for goosing equities, then raising rates and quantitative tightening will, eventually, have the opposite effect.

Commodities Update

·         Crude drifts lower

·         Precious metals steady after sell-off

Crude prices were drifting lower in early trade on Friday, continuing a pull-back which began on Tuesday. The sell-off over the last few days looks like little more than profit-taking and despite this, WTI and Brent look set to post decent gains for the week as a whole and both continue to hover near multi-month highs. On Monday crude prices soared after Turkey’s President Tayyip Erdogan threatened to cut the pipeline carrying oil from Northern Iraq to the rest of the world. This came ahead of the referendum on Kurdish independence. Sentiment towards WTI and Brent had already turned positive on evidence that US shale oil production was on the wane while OPEC and non-OPEC producers were sticking to their output cut agreement. On top of this, OPEC and the International Energy Agency have both upped their global oil demand growth forecasts.

Gold and silver prices have steadied over the last couple of days, bolstered to some extent by a mild pull-back in the dollar and some short covering. The two precious metals have fallen sharply since early September when both hit multi-month highs. Back then gold broke above $1,340 and hit its best level since August 2016. At the same time silver topped $18.20 to trade at its highest level since April this year. The two precious metals rallied on the back of continued dollar weakness and on safe haven demand. However, the dollar has managed to bounce off recent lows thanks to the US Federal Reserve managing to convince investors that it is serious about tightening monetary policy. In addition, investors seem convinced that there’s relatively little likelihood that the war of words between the US and North Korea will develop into full-blown hostilities.

Forex Update

·         Dollar consolidates

·         USD lifted by hawkish Fed/tax reform

The US dollar has rallied sharply this week although it pulled back from its best levels in yesterday’s trade. The greenback got a much-needed lift following a hawkish speech from Fed Chair Janet Yellen on Tuesday evening and as the Trump administration’s proposals for tax reform got a “thumbs up” from the Republican House Freedom Caucus. Dr Yellen said the FOMC shouldn’t wait for inflation to hit 2% before raising rates and warned that moving gradually could be risky. But she also put in a dovish caveat saying the Fed may need to slow the removal of accommodation should the economic data take a turn for the worse. Trump’s tax reform plans include a significant cut to corporation tax and a tax break for corporations when they repatriate profits from overseas. Individuals will also benefit, and not just the rich. Standard deductions will be doubled and the system streamlined and simplified. But while the president’s own party may be on board, he may have to make concessions to get it through Congress.

Upcoming events

Today’s significant events and economic data releases include the Euro zone’s Flash CPI and Canadian GDP. From the US we have Core PCE (the Fed’s preferred inflation measure), Personal Spending, Personal Income, Chicago PMI, Consumer Sentiment and Inflation Expectations.  

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Posted by David Morrison

Tagged: AM Bulletin briefing

Category: AM Bulletin


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