Markets ahead of the UK elections, the ECB meeting, and the testimony to a Senate committee by former FBI Director James ComeyPosted on Wednesday, June 7 2017 at 2:53 pm GMT+0000
The Euro is trading within a narrow range ahead if the ECB meeting.
The euro has been moving sideways all week moving about 40 pips a day, but at the same remains close to the six-months high posted right below 1.13, awaiting the ECB meeting on Thursday.
I do not expect any changes in European monetary policy during that meeting. Last week, Draghi was cautious when he pointed out that it is too early to talk about tightening policy now, despite improved data, especially those related to inflation.
I think it is too early to bet on the possibility of reducing the QE awaiting for bigger stability in economic data and a clearer picture of Brexit negotiations.
Investors’ focus would be turned towards the press conference, searching for any hints about the future of monetary policy and future decisions of the central bank. Major resistances lies at 1.1350 and then 1.15 and support levels lies at 1.12 and 1.1150.
Will the dollar continue to rise after the interest rates hike?
The dollar reacted negatively to the Friday’s disappointing job data, falling to a six-month low.
Despite the unemployment rate falling to its lowest level since March 2001, payrolls rose, also JOLTS which is seen as a very important indicator of jobs and the labor market, was positive also. And therefore the possibility of a rate hike during this month’s meeting is still high and I think a 0.25 pip hike is possible and already priced.
So the most important question is, will the dollar continue to rise after this hike? Here we will have to watch the testimony to a Senate committee by former FBI Director James Comey, and see whether he will carry evidences against Trump.
I think there are enough reasons that might deny the Federal Reserve to talk about another hike in September and this could be negative for the forthcoming dollar path.
Sterling is facing sharp fluctuations ahead of UK election.
Sterling is facing sharp fluctuations awaiting the final result in the elections tomorrow.
The pound gained nearly 400 points with Teresa May calling for elections in April as an attempt to get the absolute political majority that will support her lead the process of negotiations effectively
Recent polls showed the opposite. It is obvious that the battle might narrow lead for the Conservatives, especially after announcing their electoral plan, and their intention to impose elderly taxes, and may’s refusal to run the election debate reflected some weakness.
May and the Conservatives are still likely to win, but the important question is, many seats could Theresa May win? Currently have a majority of 17 seats and aspirants to increase the number to 60 seats and therefore the closer the result and narrower their leadership would have negative impact on the pound and the Brexit negociations.
Asian markets weighed by dampened risk appetite.
Asian stocks fell key as risk events tomorrow dampened risk appetite in the markets. This helped support gold near seven-month highs.
Japanese indexes were the biggest losers in Asia today, with the Nikkei 225 falling by 0.28% due to stronger yen as well as global economic risks affecting markets.
The Yen hit a fresh seven-week high and I expect it to continue its rise in the near-future. USD/JPY approached from the 109.00 level, and if global economic risks persists the pair might target the 107 area, and of course this will negatively affect the Japanese stock market in the future.