Monday December 12, 2016 - 10:44:42 GMT
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Early Forex Trading Themes for Monday 12 December 2016
Early Forex Trading Themes for Monday 12 December 2016 --
- No major data has been slated for release today. Nevertheless, markets are moving as a key FOMC policy looms on Wednesday. EURUSD just tested the key psychological 1.0600 line. The 1.0500 level is proving to be a tough nut to crack.
- Key potentially market-moving data Tuesday could be the latest U.K. inflation data when its CPI and RPI data are released. Movements in the GBPUSD can impact EURUSD via the EURGBP cross.
- The Major event of the week ahead is the FOMC policy decision on Wednesday. It is widely anticipated that the central bank will raise the mid-point of its 0.25%-0.50% target range (0.375%) for Fed Funds by 25bps to 0.625%. This change has been repeatedly signaled by Fed speakers, and money market indicators say that decision makers have placed 100% odds on this rate adjustment. In earlier times, markets would not react much when something that was widely expected took place, but we are in the era of news algos today and seemingly they do not know what we know. They just mindlessly react to headlines. So the Fed rate hike could trigger price volatility.
- More important than the expected rate announcement will be what Fed Chair Yellen will have to say about the expected future course of policy. With the U.S. moving to a more expansive fiscal policy and the economy already showing sings of coming back to life, I expect Chair Yellen to take a less dovish posture on future rate moves. Obviously she has to be cautious about the future, but odds are the tone of her comments will change and they should be USD constructive.
- I feel ECB President Draghi was playing a semantics game Thursday when he announced the "taper" of its asset purchases to EUR60b per mo from EUR80b starting in April 2017. Draghi claimed it was not a "taper" but of course it was, and it generated a "taper tantrum" in EURUSD. I took his dovish policy tone as an effort to "soften" the blow to Eurozone markets. Despite his comments, I feel the ECB is unlikely to increase asset purchases again, except under extreme circumstances.
WEEKLY HIGH IMPACT NEWS:
09:30 GB- CPI/RPI
09:30 GB- Employment
13:30 US- Retail Sales
13:30 US- PPI
14:15 US- Industrial Production
15:30 US- Crude Oil
18:00 US- FOMC Decision
00:00 All-Day- flash PMIs
00:30 AU- Employment
08:30 CH- SNB Decision
09:30 GB- Retail Sales
10:00 DE- ZEW Survey
12:00 GB- Bank of England Decision
13:30 US- CPI
13:30 US- Current Account
13:30 US- Weekly Jobless
10:00 EZ- final HICP
13:30 Housing Starts/Permits
John M. Bland, MBA
CURRENT CONDITIONS: Mild Risk-Off
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