The central banks remain the key driver of FX, is the message from today’s video with Alejandro Zambrano, Chief Market Analyst at Londinium FX, as we discuss central bank risk ahead, EUR/USD, FTSE 100 and GBP weakness. Zambrano is also joined by Alan Green, CEO of Brand Communications, and Zak Mir, Technical Analyst at Zak’s Traders Cafe.
Highlights:
“BOJ officials have a habit of changing plans and surprising markets.”
“Fed – CME data shows no one is anticipating a rate hike tomorrow. It would be more about what is going to happen throughout the year. December probability stands at 48% and markets are under-appreciating the possibility of a hike in December, especially if labor data continues to strengthen.”
“If the BOJ somehow manages to trigger a risk-off – that could be something which might force the Fed to delay the rate hike. European banking sector is a issue as well”
“EUR/USD – one driver the institutional side has been talking for some time now is the real yield (adjusted for inflation) differential between US and Eurozone. With the idea of Fed looking to raise rates, we started to see yield differential move in favor of the USD.. but the risk is a sharp inflation pick up in US, which would lead the spread back in favor of the EUR. If Fed is hawkish tomorrow, dollar could strengthen.”
“EUR/USD: As long as the pair trades below 1.1085, the spot could go down to 1.09 levels.”