Today’s Key Market Drivers – 20th September 2017

Currency markets are in limbo waiting for the US Federal Reserve to release its statement tomorrow morning at 4.00am AEST. As I mentioned yesterday the US Fed has a balance sheet of assets it purchased post the GFC through artificially printing trillions of dollars and buying assets that nobody was likely going to buy. This asset purchase program along with leaving interest rates at 0% for years saved the US economy from going into meltdown and now the economy has recovered it is time to sell the assets that the Fed bought. What is the size of the balance sheet of assets you ask? $4.2 trillion dollars! Yellen will likely announce the plan this week or at least tell us when the Fed will tell us the plan to sell it down. Keep in mind the US Fed is not going to want to spook financial markets so the selling down plan will be gradual and over a long period of time but the initial reaction from financial markets could be very positive or very negative depending on how the major players interpret what the Fed says it will do.

The US Dollar weakened on Tuesday but this really means nothing in my opinion because this time tomorrow it could be skyrocketing higher or further lower, it will all come down to how the major market players view the Fed’s announcement. What will also be important for the market to read is the Fed’s plan with respect to the next interest rate hike. It’s been suggesting another rate hike is possible before Xmas, however, it has also said that inflation must pick up first. If the Fed gives traders reason to believe that it will or won’t raise rates one more time before Xmas this will also increase the volatility on the US Dollar. So, I am just giving you plenty of warning to expect sizeable moves on the US Dollar beginning tomorrow morning at 4.00am AEST. It is my strong advice that you do not try and trade the news as this can often end in disaster for many novice traders.

Mario Draghi the European Central Bank President is speaking on Friday and with traders speculating the ECB will taper its stimulus program beginning in October the market will be eager to hear what Draghi says when he speaks at a roundtable discussion in Dublin. I believe the good news is all baked into the Euro and the sizable move higher has already happened. For the Euro v USD Dollar to continue higher in coming days it’s going to need a weaker US Dollar.

Today’s economic calendar has very little in the way of high impacting news with UK Retail Sales the only piece of economic data that has the potential to get any attention before the Fed. Tomorrow morning all the attention will be on Janet Yellen at 4.00am AEST when she releases the latest US Federal Reserve statement and hosts a press conference to explain the Fed’s plans. The Fed’s statement and comments will likely be the key driver for the US Dollar and the wider market for the balance of the week.

 

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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