Today's Highlights
Whoa Dollar!!
Draghi Shows Teeth
Bitcoin Surging Again
Please note: All data, figures and graphs below are valid as of February 7th. All trading carries risk. Only risk capital you're prepared.
Market Overview
The Markets are clearly jittery this morning. Just as I started writing to you we're seeing one of the strongest swings I've seen in a while as the US dollar made a major shift against the rest of the market.
The move seems to have been caused by China's publication of their reserves, which show that the country's foreign holdings have dropped below $3 trillion for the first time since 2011.
Here we can see the dollar kicking the renminbi to the curb in the USD/CNH.
The move is also accentuated in the GBP/USD, which just fell off a cliff.
Though China's numbers may be the trigger there's certainly more going on here.
The dollar has been acting weak for about a month now even though it's anything but. In a speech yesterday Fed Member Lacker stated that we could see another rate hike as soon as next month. If Trump manages to pull out a spending plan, which he may well do, and the Fed is going for three hikes this year, March is looking like a very feasible option.
However, at the moment the market is pricing in less than 25% chance of a rate hike in March. So if the above is the case there's still a lot more room for the dollar to grow. At the moment, 66% of eToro trading on the US dollar index is going long.
Grrrrr
Mario Draghi showed his teeth yesterday in a clear attempt to display territorial dominance. In his speech, he made a clear swipe at populism, in fact a few swipes, as he attacked the policies and statements of Donald Trump and Marine Le Pen.
One of the highlights was that he said very clearly that the ECB has not in any way intervened in the currency market. This is obviously in direct response to the Trump administration, who has been accusing many countries of currency manipulation lately, including Germany.
Draghi also said that even though inflation was creeping up in some areas of the Eurozone, the massive stimulus program was still needed.
Reminder: This is the same stimulus program that has been keeping the euro subdued since 2014.
Dear Mr. Draghi,
There are many ways to intervene in a currency market. Creating massive quantities of money in order to keep the currency low is also a form of intervention. Mr. Trump, is simply calling out the participants of the currency war in which your institution is clearly involved in. Though I hate to say it, and I'm still convinced there's a better way to handle this than attacking your allies, I'm calling this one.
One nothing, Trump.
As this plays out, the euro is falling hard against the dollar. See the EUR/USD this morning.
One nothing, Draghi.
Bitcoin Surging
When two friends squabble, the third laughs.
Indeed, everything else in this update leads to this.
Check out Bitcoin this morning as high as $1046 a coin!!
The next point of resistance is $1138, the previous high reached in January.
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.