Weekly Trading Forecast: Trade Wars and Rate Decision Keep Traders on Edge
Capital and FX markets held remarkably stable given the fundamental pressure filling the horizon. With trade wars steadily gaining traction, key rate decisions (Fed, ECB, BoJ) and a range of high profile event risk the week ahead; traders should keep close watch on sparks in the markets.
The US Dollar remained on the defensive for much of last week as markets continued to revel in the de-escalation of Eurozone political risk. Haven-seeking capital flows that launched the currency to an 11-month high as governments in Rome and Madrid appeared ready to implode reversed course after both managed to muddle through (at least for now).
Rumors that the ECB is getting ready to make a tweak to its QE program have spurred the Euro turnaround. The Euro will need more than rumors to keep its rebound going.
Sterling is set to be dictated as key data kicks into high gear amid the backdrop of rising Brexit uncertainty.
USD/CAD holds near the monthly-high (1.3067) as the unexpected contraction in Canada Employment dampens bets for an imminent Bank of Canada (BoC) rate-hike, and the pair stands at risk of making a more meaningful run at the 2018-high (1.3125) especially if the Federal Open Market Committee (FOMC) delivers a hawkish rate-hike next week.
The Australian Dollar has just endured something of a volatile week. The good news, perhaps, is that it may not be set for a repeat in the next seven days. The bad news, for bulls at least, is that there are few reasons to expect much more strength.
The Chinese Yuan gained against the U.S. Dollar after three consecutive losses. This was largely driven by the reduced momentum in the Dollar rally.
Gold prices inched higher this week with the precious metal up nearly 0.30% ahead of the New York close on Friday. The gains come amid continued strength in U.S. equity markets with the S&P 500 pressing higher for a third consecutive week.
Looking ahead to next week, on Wednesday the Fed is expected to raise rates by 25 bps, and barring a major surprise on that front attention will, as per usual, be on the language and forward indications.
Crude oil may have a difficult time resuming the trend that was so prevalent in the first half of the year as OPEC plans to fight sanctions and increase productions while US oil inventories showed the sharpest increase in US oil stockpiles since October 2008.
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