This week we looked at the following topics,
- Italian Election
- Theresa May on Brexit
USD gains strength on Powell’s comments.
In part 1 of his testimonial, Chair Powell reinforced an optimistic outlook for the US economy, highlighting growth in the domestic economy, unemployment rate at historic lows and reiterating guidance for further gradual increase in policy interest rates.
As expected, his statements portrayed a positive sentiment towards a growing US economy and thus a strengthening USD.
Currently there is even talk for probability of 4 rate hikes this year, given the optimism in Chair Powell’s statements regarding the economy. Ultimately, I would trade with a bias towards a stronger USD.
In part 2 of Powell’s testimonial tonight, we look for the hawkish statements to continue. A stronger USD would affect most of the major currency pairs, driving prices lower along with the existing trend.
In the event of a stronger USD, a contradictory move in the USDJPY is expected. We see strength in the Yen as BoJ reduces bond purchases, giving hint to a scaling back of its massive monetary stimulus program (stealth tapering)
Take note, tomorrow, PM May speaking about UK’s relationship with Europe, post Brexit. And the Italian election over the weekend.
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