Category Archives: Blog

How long will it take for the European banks’ monetary policy to normalize?

  On Thursday (September 13th), the European Central Bank (ECB) announced that it will maintain the three key interest rates unchanged. It will maintain a monthly debt purchase of 30 billion euros until the end of September 2018. It will end its purchase in December 2018 and will maintain The current key interest rate remains unchanged until at least the summer of 2019.

  At the same time, the European Central Bank lowered its GDP growth forecast for 2018 and 2019, maintaining inflation expectations for the next three years. It is expected that the GDP growth rate of the Eurozone in 2018 will be 2%, the previous value is 2.1%; the GDP growth rate is expected to be 1.8% in 2019, and the previous value is 1.9%.

  In addition, European Central Bank President Mario Draghi said that the downside of economic expectations is due to weak external demand, and the euro zone’s economic growth has been higher than the potential growth rate for some time. At present, domestic cost pressures are constantly tiring, and protectionism and emerging market risks are prominent.

  However, at the subsequent press conference, Draghi “changed his face” and unexpectedly released positive comments, expressing his willingness to watch the inflation outlook, saying that the uncertainty of the inflation outlook is declining, and inflation is moving closer to our goal, even if QE is over. Inflation can still move closer to 2%, and core inflation levels will rise before the end of the year.

  During Draghi’s press conference, the euro/ dollar reversed the previous decline, and the short-term sharp rise of 90 points, breaking the 1.17 mark for the first time on August 30.

  On Friday (September 14), Rabobank analysts pointed out that the European Central Bank (ECB) monetary policy normalization still has a long way to go. So the next risk is that when the next recession comes, the ECB has little room to act.

  The Dutch Cooperative Bank pointed out that if this is the case, it will depend on whether the fiscal policy at the time can stabilize the economy. At present, most countries in the Eurozone do not seem to have enough fiscal space to properly carry out this task, which may increase the impact of the next recession.

  At the same time, the bank’s analysts pointed out that the current eurozone debt ratio and budget balance show that compared with the pre-crisis 2007, the financial situation of the eurozone countries has not improved or even worse.

  In addition, the Dutch cooperative bank pointed out that given the current economic performance of the eurozone countries, it is now a buffer. Unfortunately, however, European fiscal rules are ineffective in forcing countries to significantly increase their savings during the boom.

Experts Claim The dollar will rise even higher!

Experts Claim The dollar will rise even higher! Recommended selling assets in Europe and emerging markets.

  Rob Citrone, a hedge fund manager and head of Discovery Capital Management, said in an interview with CNBC on Thursday that he believes the European market is brewing a bubble and investors should sell assets in the region.
  Citrone reiterated his concerns about the sustainability of Italian debt and populism in the region.

  He is also shorting Turkish assets and is bearish on the Mexican and South African markets. He said that in addition to India and Argentina, investors should “sell all out” of emerging market assets. He said that as the second largest economy in South America, the Argentine currency has depreciated by 50% this year, but although it has been hit, it is still “very attractive” for fund managers.
Citrone said that in the long run, the US trade tariffs are a “big problem” for the Chinese market. He said, “I think the market will see some rebound in the short term, but we believe that tariffs will come. This is not a short-term issue. ”Download the app Read this article for more in-depth coverage
  Citrone said that in the long run, the US trade tariffs are a “big problem” for the Chinese market. He said, “I think the market will see some rebound in the short term, but we believe that tariffs will come. This is not a short-term issue. ”

  Citrone insists that the dollar will strengthen and that he is optimistic about US assets. “We prefer the United States to the rest of the world,” he said. “This is the best place to invest in the world.”

FED & BOE TO MOVE THE MARKETS

The central banks of the U.S. and the U.K. will be holding their monthly sessions this week to decide on where to set key interest rates. Investors worldwide will be watching these key events closely as they can greatly affect USD and GBP pairs*

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FED Webinar
Wednesday @18:45 GMT
The EUR/USD climbed after the U.S. Federal Reserve voted to leave rates unchanged at 1.25% last month, highlighting “solid” economic growth. This left room for another rate hike in December with analysts claiming that a rate hike is highly likely this month pricing in the odds at 100%, according to Investing.com’s Fed Rate Monitor Tool.
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BOE Webinar
Thursday @11:45 GMT
As expected, the Bank of England decided to increase interest rates in November, marking the first rate hike in the last decade. Specifically, the BoE increased the benchmark interest rate from a record low of 0.25% to 0.50%, which effectively reversed the last rate cut in the wake of the Brexit referendum. The rate hike was widely anticipated, however, which led to a sell-off of the sterling and caused the EURGBP to rally.
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*Source: investing.com
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What do the analysts expect this month?

Release Forecast* Previous*
FED Interest Rate Decision 1.50% 1.25%
BOE Interest Rate Decision 0.50% 0.50%
*Table source: investing.com

How might the Forex Markets be affected?

icon A generally hawkish stance and/or a higher than expected key interest rate can be considered as positive/bullish for USD and GBP pairs.*
OR
icon A dovish monetary outlook and or a lower than expected rate is expected to have a negative/bearish effect on USD and GBP pairs.*