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18 September 2017- Dean Forex Market Commentary

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Dean's Daily FX Update – 18 September 2017

In the Zone

  • GBPUSD
  • AUDUSD
  • USDJPY
  • USDZAR
  • Oil

Noteworthy News

  • There were comments out on Friday by National Security advisor McMaster stating that there is now no more room for diplomacy regarding North Korea, everything is now pointing to military action.

Recap

The US data is becoming difficult to interpret which in doubt will not be a hindrance to a data dependant Fed. We saw that inflation was slightly stronger last week, yet all the measures of the report were weaker than expectations – like CPI, these could all have been skewed by the impact of the hurricane. I am sure that production data will also be skewed as a lot of Texas and now Florida will have less productivity for some time.

The greenback was slightly lower on these numbers on Friday but it did not “run away,” with only the GBPUSD and NZDUSD experiencing major moves, in both instances it was more the base currency that was the catalyst. The US indices continue to run which in my opinion is an indication that the market is enjoying the fact that Trump is continuing to engage the opposition party. Trump is an inconsistent leader but he has proven to be persistent and is willing to try anything to get things done. I suspect that the market is pricing in that new policies will get done.

I am keeping a keen eye on the GBPUSD today, there was a massive move on both Thursday and Friday. The BOE was overly hawkish last week and Governor Carney has effectively guaranteed an interest rate hike at the next meeting, the market was only pricing in a 65% probability and so the market had play catch up. The market responded with cable strengthening by over 200 pips, I will look to see if there is any chance of fading this move today, if nothing presents itself though my tomorrow morning, I will walk away ahead of the Fed meeting on Wednesday.

The USDJPY continues to be a fundamental trade to me, it is trading at a major 61.8 fib level this morning and with nothing coming out of North Korea this weekend, we could see a continuation of the recovery seen last week. We only need one comment or missile test though to see the JPY drop like a load of bricks.

The Fed meet on Wednesday and that will be the market mover this week, we know that they are watching the data and unfortunately the short run is going to look weak. I suspect that the Fed will look past this and although 3rd Quarter GDP will be lower, there will be a higher rebuild in the 4th Quarter.

Important Economic Data out today

17:00                                     GBP                                       BOE Governor Carney Speaks

Consensus:                         None

Effect:                                   More hawkish than expected is good for the GBP

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