Today's Highlights
Doves at the Fed
Scandal in Paris
Carney's big Shot
Please note: All figures, data and graphs below are valid as of February 2nd. All trading carries risk. Only risk capital you're prepared to lose.
Market Overview
The Fed event last night was a bit more eventful than anticipated, even though nothing really changed. The reserve bank of the United States put out a bland statement that was almost a carbon copy of their previous statement, changing only a few words here and there.
As far as we know, the Fed still wants to hike rates three times this year. So if they want to space them out properly we'd really need to look at March or May for the next move. If that's going to happen, they really need to start signalling that in order to prepare the markets.
At the moment, they seem to be waiting for a signal from DJ Trump before starting the party. For Trump, whilst most of what he's currently doing are what he promised, some things still don't seem to be on the agenda just yet, like, fiscal spending for example. We haven't seen any executive order about re-building roads, hospitals, and airports like he promised in his victory speech on the night of the election. Nor were these things mentioned in his inauguration speech.
Without the spending, the Fed's got no reason to get the party started and the dollar balloon is now being deflated.
Here we can see the US dollar index since November. We're now well below 100 points and at this point, we're actually closer to the pre-election levels than we are to the 14 year high seen at the start of the year.
Meanwhile in Europe
A scandal in Paris has thrown a monkey wrench into the French parliamentary elections as the front-runner Francois Fillion may be forced to drop out. If that happens, it will significantly increase the chances of the radical minded Marine Le Pen to take the Presidency.
The euro has actually been rising against the dollar, because of Trump.
At the moment the EUR/USD is above 1.08 and the eToro sentiment is showing 55% are selling.
Down Under
Just a really quick point here. The Australian dollar has been flying this morning.
Some positive housing numbers and Trade Balance mixed with a weak USD was all it took.
The Main Event
Today's big event will be Mark Carney and the Bank of England. The interest rate decision along with the quarterly inflation report will be released at 12:00 GMT, which will be followed by a press conference at 12:30.
As we're seeing with the Fed, interest rate adjustments and even the expectation of interest rate adjustments can create huge trading opportunities.
Here's the situation in a nutshell...
The UK ended 2016 as one of the strongest advanced economies in the world. Despite Brexit or because of it, all the numbers look fantastic.
The only issue on the table at the moment is the weak pound, which is causing inflation.
In order to strengthen the currency and keep inflation in check, Mark Carney would very much like to raise the interest rates, but the markets aren't ready for that. At this moment, the markets are pricing in a 1.7% chance of a rate rise today and just 45% chance of a rate rise by December.
If Carney is serious and does indeed want to put his foot on the rate rise pedal, he's going to need to get these numbers up and prepare the market for a shift.
Now that Theresa May has secured parliament's approval to trigger Article 50 in March, today could be Carney's big chance. Let's see if he takes it.
Disclaimer: This content is for information and educational purposes only and should not be considered investment advice or an investment recommendation. Past performance is not an indication of future results. All trading carries risk. Only risk capital you're prepared to lose.