The world is grappling with a forecasted economic slowing reinforced by the perception that interest rate hikes are over in the USA, given the one day rally in equities. Today the equities market sold off, indicating that the market is more concerned with the prospects of a economic slowdown versus, monetary policy by the FOMC.
What does this mean for Forex?
The implications are that the USD benefits relative to other pairs. Emerging market currencies will come under pressure NZD, AUD, and also the JPY. CAD is coming under pressure since, a slowing economy means less demand for luxury goods/oil. And thats why your seeing the oil/gold markets stalling at these levels. Oil is being supported by middle east violence but its old news, if US pressures Iran more, and Iran becomes retaliatory, and oil embargo might be possible. Look for indications that this might occur. With world economies slowing the government debt market, mainly bonds are rising in price. And thats what your seeing happen. With 10 year note yields at 5.05% and lower today. And you ask yourself isn't it bearish for the USD, that the FOMC is not supporting the USD with monetary policy? Yes, but when things in the world become more unpredictable and chaotic, the herd flocks to the USD. To summarize:
1) NZD, AUD, JPY bearish (Asian/Emerging Markets)
2) CAD bearish (Commodity Currencies/OIL/GOLD)
3) Euro bearish (but not as much as the JPY) GBP/JPY cross bullish
4) Government Bonds bullish/mainly USD bonds
5) Equities bearish
6) OIL/GOLD bearish, GOLD more so than OIL, Iran Oil embargo possible
Chris
What does this mean for Forex?
The implications are that the USD benefits relative to other pairs. Emerging market currencies will come under pressure NZD, AUD, and also the JPY. CAD is coming under pressure since, a slowing economy means less demand for luxury goods/oil. And thats why your seeing the oil/gold markets stalling at these levels. Oil is being supported by middle east violence but its old news, if US pressures Iran more, and Iran becomes retaliatory, and oil embargo might be possible. Look for indications that this might occur. With world economies slowing the government debt market, mainly bonds are rising in price. And thats what your seeing happen. With 10 year note yields at 5.05% and lower today. And you ask yourself isn't it bearish for the USD, that the FOMC is not supporting the USD with monetary policy? Yes, but when things in the world become more unpredictable and chaotic, the herd flocks to the USD. To summarize:
1) NZD, AUD, JPY bearish (Asian/Emerging Markets)
2) CAD bearish (Commodity Currencies/OIL/GOLD)
3) Euro bearish (but not as much as the JPY) GBP/JPY cross bullish
4) Government Bonds bullish/mainly USD bonds
5) Equities bearish
6) OIL/GOLD bearish, GOLD more so than OIL, Iran Oil embargo possible
Chris
Price is the only indicator.