News - PDEXTrading.com

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’s monetary policy report: The economy is improving, and the gradual rate hike is still the main issue

on Friday (July 13), the Fed disclosed a semi-annual monetary policy report submitted to Congress. The report is generally optimistic. The report said that the US economic growth was strong in the first half of this year, and the Fed is expected to continue to raise interest rates gradually . Due to the expected wording of the report, the US dollar and gold did not respond significantly.

　　This is from Bao Weier second document since early February at the helm of the Fed, the Fed submitted to Congress. Powell is scheduled to answer questions about Congress next Tuesday and next Wednesday.

The 63-page report is in line with current expectations as detailed by the Fed at the policy meeting, that is, strong economic growth and low unemployment require a rate hike, but the lack of severe inflationary pressures means that it can maintain a gradual rate hike.Download the app Read this article for more in-depth coverage
　　The 63-page report is in line with current expectations as detailed by the Fed at the policy meeting, that is, strong economic growth and low unemployment require a rate hike, but the lack of severe inflationary pressures means that it can maintain a gradual rate hike.

　　The Fed said in the report that in the first half of this year, the overall economic activity of the United States seems to have grown steadily, and the economy continues to be supported by favorable consumer and business confidence. In the first half of the year, household wealth increased, foreign economic growth was stable, and domestic financial conditions were loose.

　　Therefore, the Fed expects that “interest rates will gradually increase” is appropriate. The Fed is currently striving to continue to promote economic expansion. This round of expansion is the second longest economic expansion in history.

　　The Fed said that the Trump administration’s tax cuts may lead to a rebound in consumer spending from a downturn and may provide modest boosts for this year’s economic growth.

　　Powell mentioned in an interview on Thursday that the US economy is relatively optimistic. He said that he believes that the US economy is still in a “very good position” and that recent government tax and spending plans may boost GDP growth within three years.

　　Since the tightening cycle began in December 2015, the Fed has raised interest rates seven times, and recently raised the benchmark interest rate by another 25 percentage points in mid-June. The Fed is expected to raise interest rates twice before the end of the year.

　　In addition, Fed policy makers once again stated in the report that wage growth has been weaker than expected given the current unemployment rate of 4%. If labor demand is still strong, more workers in the golden age will enter the labor market. Wage growth may be under pressure due to weak productivity, and the labor market is still likely to be further slack.

　　Focus on the impact of trade protectionism

　　The report mentions the Trump administration’s trade protectionist policy. Although there was no discussion, the report stated that “although there is not a lot of pressure, uncertainty is a concern of financial markets.”

　　Many policymakers expressed concern about trade disputes with major allies, and Powell said on Thursday that high tariffs on products and services could damage the economy.

　　Earlier announced US July University of Michigan consumer confidence index initial value of 97.1, less than expected 98, due to consumer concerns about trade protectionism. After the data was released, the US dollar index fell in a short-term.

　　Curtin, head of consumer research at the University of Michigan, said that consumer confidence declined in early July, but it was almost the same as the average of the previous 12 months. The current decline in consumer confidence is due to growing concerns about the negative impact of tariffs on the domestic economy. They are worried about the future economic growth rate and rising inflation.

　　After the Fed disclosed the report, there was no significant fluctuation in the market. Mainly because the tone and content of the report are basically consistent with the contents of the previous Fed policy meeting.

　　After the disclosure of the report, the US dollar and gold did not respond significantly. As of press time, the US dollar index was 94.7902, a decrease of 0.02%; spot gold is now reported at 1242.46 US dollars / ounce, an increase of 0.4%.

Investment bank reveals why the recent rebound in gold prices is expected to hit $1,300 during the year.

According to TD Securities, after a near one-year low in June, gold prices are expected to recover and continue to rise in the remaining months of the summer. The lack of “fuel” in the iterative trade war and the weakening of the dollar are factors that support the price of gold.

　　TD Securities Global Strategy Director Bart Melek wrote in a report released on Monday (July 9): “The price of gold is expected to exceed $1,270 per ounce in the summer. In fact, if the price of gold rises in the last three months of 2018 We are not surprised by $1300/oz.”

　　Melek pointed out that gold has started to recover last week, and COMEX August gold futures rose from $1,240 per ounce to around $1,260 per ounce.

　　Melek wrote: “The weaker dollar, lack of interest in risky assets and the decline in long-term bond yields were key factors in the rise in gold prices last week. The bond yield curve was further flattened, which triggered a possible end to the current US economic expansion. Guessing and worrying, this is another important reason why gold prices have performed relatively well in recent days.”

　　The report emphasizes that in the short term, some market speculators may recover their hawkish prospects on the issue of the Federal Reserve’s (FED) tightening of monetary policy, which will benefit the gold price.

　　Melek added that the strength of emerging market currencies will also play a key role in boosting gold prices this summer.

　　At the same time, Melek expects that as the European Central Bank (ECB) prepares to raise interest rates, the dollar’s gains will fall back, which is another good sign of gold.

Daniel Ghali, a commodities strategist at TD Securities, pointed out that investors may turn their attention to macroeconomic data as the trade war between China and the US has not been seriously upgraded this week.

　　Ghali writes: “US inflation data may become the focus of precious metals traders, CPI and PPI will be released this week. But in addition to macro data, with US President Trump visiting Europe, market participants may also pay attention to NATO Summit.”

　　Ghali explained: “Given the recent stock market unease and the resurgence of global economic growth that will be driven by trade, traders may interpret inflation weakness as a sign that the Fed may still abandon radical interest rate increases.”

　　This week, investors will usher in some heavy data, the most important of which will be the US Consumer Price Index (CPI) on Thursday.

　　Analysts pointed out that if consumer inflation data continues to maintain current trends or accelerate, then the dollar may be rebound, as the possibility of another rate hike in 2018 will rise further. However, if the CPI and the last Friday’s wage data echo and fall back, it may lead to the suppression of the dollar, which will benefit the gold price.

The FED & BOE Move The Markets

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

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.

Only 500 Spots are Available

As expected, the Bank of England increased 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%, effectively reversing the last rate cut after the Brexit referendum. However, the rate hike was widely anticipated, which led to a sterling sell-off and caused the EURGBP to rally.

Only 500 Spots are Available

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?

A generally hawkish stance and a higher-than-expected key interest rate can be considered positive/bullish for USD and GBP pairs.*

A dovish monetary outlook and a lower-than-expected rate will have a negative/bearish effect on USD and GBP pairs.*