Today’s Key Market Drivers – 31st July 2017

US 2nd quarter GDP data released on Friday failed to beat economist forecasts, which gave traders another reason to sell the US Dollar and price in no more interest rate increases at the US Federal Reserve for 2017. The US GDP data essentially met the market’s expectations but as I have been saying for some time now the US Dollar will only likely rise back higher on “new” positive news and until it gets some the selling pressure will likely remain. Donald Trump is certainly not helping any US Dollar bulls with the Republican administration’s policy agenda in tatters and White House staff quitting or being sacked each week. There are simply other currencies that offer better upside in the coming 6 to 12 months and the shine has disappeared from the US Dollar.

One such currency that offers further upside is the Euro with the ECB likely to taper the current stimulus program before the end of the year. The Euro was falling last year against the US Dollar as the market priced in higher interest rates in the US and lower interest rates for longer in Europe. Those expectations have now changed with the US Fed delivering on interest rate hikes and the European Central Bank hinting it will soon also need to change monetary policy. What happened to the US Dollar between 2013 and 2016 is happening to the Euro right now. The US Fed stopped printing money and told the market it would eventually need to tighten interest rates. The ECB, in my opinion, is likely going to do the same thing in the coming 2 years and the upward pressure on the Euro will likely continue provided the economic expansion continues at a moderate pace in the Euro area.

The Canadian Dollar got another boost on Friday after the latest GDP numbers beat market estimates and backed up the move from the Bank of Canada to raise interest rates in July by 0.25% to 0.75%. The Canadian Dollar has been a stand out performer in recent months and with the BOC now in a tightening cycle of interest rates provided the economic data continues to move along at the current pace there is no reason why the Canadian Dollar cannot continue to steadily rise over the coming 12 months.


Looking ahead to this week’s economic calendar and it is shaping up to be one of the busiest weeks for high impacting economic data we have seen in weeks. No less than 20 high impacting news items and two major central banks announcing their latest interest rate decisions. The RBA on Tuesday and the BOE on Thursday are the two Central Banks reporting this week and you can also throw into the mix official US jobs numbers, Euro Zone CPI, Canadian Unemployment data along with China PMI and numerous other high impacting news items. The data should help keep currency volatility at a high.

 

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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