Today’s Key Market Drivers – 27th July 2017
The Aussie Dollar continues to climb thanks to the continued fall on the US Dollar. Today at 4 am AEST the US Fed released its latest monthly statement and interest rate decision. The market had priced in the US Fed was going to stay on hold with interest rates however it was comments in the statement that said the Fed would now take its time raising rates further that really accelerated the US Dollar selling pressure. The market is now pricing in the US Fed will not raise rates again in 2017 and unless we get some “new” news the market hasn’t been anticipating then the US Dollar, in my opinion, is likely going to fall further. The Fed is concerned inflation is not running at its desired target of 2% and until it does the likelihood of further rate hikes is very slim. The greenback fell against all of its major rivals with the EUR v USD now trading above 1.17 for the first time in over 2 years. Simply put there is no reason for Hedge Funds and Investment Banks to buy back the US Dollar at current levels with many believing it has further to fall.
Whilst it is unlikely to raise official interest rates what the US Fed will likely do in the coming 6 months is announce when and how it will begin to unwind its trillion-dollar balance sheet. Between 2009 and 2013 the US Fed printed over two trillion US Dollars (out of thin air) and bought US assets nobody else wanted to buy. They now want to sell those assets and the selling down of these assets and the process by which the Fed will do it in my opinion has the potential to send the US Dollar and US stock market lower. The Fed has said recently it would like to sell down its balance sheet but the when and how has not been announced. The markets reaction will be critical when it does announce this process.
Looking ahead today the focus will be on US Durable Goods data, which is an important guide to how much money US consumers are spending. Durable Goods are things that are suppose to last more than 3 years such as TVs, washers, dryers and furniture. These items are naturally more expensive then a trolley load of groceries so therefore if the reading is below expectations the US Dollar selling pressure will only increase further as it will be a sign inflation is not likely going to rise.
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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