Friday June 23, 2017 - 17:16:56 GMT
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Central Banks (Bank of England and Fed) Continue To have Profound Impact On Forex Trade
John M. Bland, MBA
Bank Of England Sends Confused Policy Message The Bank of England took a page out of the Fed’s playbook this week after it sent mixed messages on policy. It’s difficult to understand the rationale for a central bank sending a confused message to the markets. Early on the week just past, Bank of England Governor Carney dampened expectations of a near-term rate increase. Then towards the end of the week Chief Economist Haldane indicated that he favors withdrawing some stimulus later this year, provided inflation data are still on track. Forex markets were confused what to do with the GBP under the circumstances.
Calm Week In EURUSD Following Fed Signals In Prior Week The latest week in forex trading has seen little in the way of forex movements, perhaps due to one of the thinnest event risk calendars of the year. The lead EURUSD relationship appears to have adjusted lower from a recent 1.1200-1.1300 trading range to 1.1100 to 1.1200. This adjustment came on the heels of the previous week announcement by the FOMC that it had hiked by 25bp its Fed Funds target range of 0.75%-1.00% to 1.00%-1.25%. This had been the third interest rate increase the past three months. The 25bp rate hike had been widely expected at the meeting. Markets still feel the Fed would like to hike rates three times this year and three times in 2018. Their ultimate goal is to raise rates to what it perceives to be the long term equilibrium rate of 3.00%. It was the tone of policy announcement, which was unexpectedly hawkish that turned the tone of the markets. Some feel that by her actions that Fed Chair Yellen was telling the markets that policy is no longer as data dependent and that it is now on a predetermined course. The central bank did acknowledge recent indications that inflation has slowed, but continues to express confidence about its 2% target over the medium term.
The most hawkish development at the Fed meeting was the announcement of detailed information about the framework an official plan to unwind the QE inflated Fed bond portfolio. The plan is expected to start later this year on a small scale and then gradually accelerate.
Amazing Trader EVENT RISK Calendar:
Mon 26 Jun
08:00 DE- IFO Survey
Tue 27 Jun
14:00 US- CB Confidence
Wed 28 Jun
14:30 US- EIA Crude
Thu 29 Jun
21:00 CN- NBS
Fri 30 Jun
07:55 DE- Employment
08:30 UK- GDP
12:30 US- Core PCE Deflator
14:00 US- final University Of Michigan
Be sure to refer daily Global-View to see the continuously UPDATED Economic Calendar and the Forex Forum for the complete list of key items (actual data, selected charts, etc.) as they are released.
John M. Bland co-founding partner www.global-view.com
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