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17 October 2017- Dean Forex Market Commentary

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Dean's Daily FX Update – 17 October 2017

In the Zone

  • EURUSD
  • USDCAD
  • FTSE

Noteworthy News

  • The EU and UK are still poles apart, the EU are seeking EUR 60bln in settlement while PM May won’t budge from EUR 20bln. Considering the pressure she has been under, I can’t see May conceding.

Recap

News started filtering in late last night that Donald Trump has drawn up a shortlist for the role of Chair of the Fed, I find this a little surprising since he sort of indicated that Yellen would retain her position. Rumour has it that John Taylor is open to being on the Fed and that Trump was excited about this idea, Taylor is the architect of the “Taylor Rule,” which advocates higher interest rates. I also find this surprising because with Trumps ambitious infrastructure plans, you would think the last thing that he needs is higher interest rates.

These kind of rumours will ultimately affect the interest rate curves, and this will have a knock on effect on the USDJPY. The pair was trading for most of the day at 111.75 and the rumours were the catalyst for the pair to trade through resistance of 112.00, the buyers will be looking for a little more momentum this morning and I suspect that this pair could trade to test previous resistance at 112.90 – 113.00 this week.

The only real piece of volatility for the market to feast on yesterday was the GBPUSD, and again this was delivered by rumour rather than technical levels. With both Davis and PM May in Brussels for Brexit talks, rumour of a “catastrophic breakdown” led sterling to crash from 1.3300 to 1.3250. These rumours were a little bit exaggerated, negotiators are just sifting through the various conditions, the pair did trade back up to 1.3285 before US rumours saw the pair settle at 1.3225. This is an illustration why I would rather seek opportunity elsewhere for now, if you are going to trade this pair, please make sure that you have a stop in place.

The indices such as the FTSE still look to be a more attractive trade to me and I am going to continue with the strategy that I have been using for the last couple of weeks in these pairs.

Important Economic Data out today

  • 12:15 GBP BOE Carney Speaks

Consensus: None

Effect: More hawkish than expected is good for the GBP

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