Today’s Key Market Drivers – 14th July 2017

Janet Yellen this week indicated further US Fed rate hikes will likely be gradual moving forward and with one more rate hike in 2017 already baked into the US Dollars price and Donald Trump seemingly falling from one drama to the next the shine on the US Dollar vs some currencies has diminished. My expectation in the second half of this year is that the US Dollar could decline simply because money will likely flow to Europe with the ECB likely to reduce its stimulus program later in the year and the market will see this as a sign interest rates at the ECB will rise. I tip UK interest rates to have risen also by this time next year and whilst you may think that’s a long way away the market will begin pricing in

I tip UK interest rates to have risen also by this time next year and whilst you may think that’s a long way away the market will begin pricing in a potential rate hike 9 to 12 months out from when they occur. The currencies that have been outperforming in recent months are the Euro and Canadian Dollar and this has been because of the expectation of rate increases at both Central Banks. The BOC pulled the trigger this week and raised the official cash rate and issued a very positive statement about the Canadian economy. As the charts show below there is plenty more room for both currencies to go higher and both are currently breaking key resistance levels and soon could be well and truly off the chain.

Will the Reserve Bank of New Zealand put rates down in the coming 6 months? Comments in recent monthly statements from outgoing Governor Graham Wheeler say it’s a better than 50/50 probability and therefore it’s my view the Aussie Dollar could rally back higher against its cross Tasman rival in the second half of this year. The AUD v NZD yesterday was sitting towards the bottom of the 5-year range.

Also, take a look at what’s going on with the CAD v JPY. Consecutive weekly and monthly gains now with price closing above key 200 EMA levels. BOC interest rates are on the rise, BOJ policy won’t change anytime soon and being long CAD v JPY is a positive carry trade.

A similar story is starting to develop on the Euro v US Dollar and if the ECB moves to taper its stimulus program then the Euro is going to likely rise over the coming 12 months.

 

About the Author: Andrew Barnett

Andrew is a professional trader and successful investor who has a strong focus on education. He is a regular Sky News Money Channel Guest and one of Australia’s most awarded and respected financial experts, and is regularly contacted by the Australian Media for the latest on what is happening with the Australian Dollar. Director at LTG GoldRock, Andrew Barnett, guides thousands of traders around the world in the live market on a daily basis, advising them on buy and sell directions, as well as trading his own personal account. Andrew, a regular key-note speaker at trading and wealth-creation events throughout the Asia Pacific region, is an authorized representative registered with the Australian Securities and Investment Commission (ASIC).

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