Rally In Dollar And Stocks On Pause
eToro | Feb 14, 2017 12:08
Today's Highlights
Rally in Dollar and Stocks on Pause
Trumpdate (trump-update)
Yellen Plays Chicken
Please note: All data, figures & graphs below are valid as of February 14th. All trading carries risk. Only risk capital you're prepared to lose.
Market Overview
The awesome stock rally seems to be on pause this morning during the Asian session and we can see some modest declines in the Jpn225 and China50.
The US dollar has been gaining gradual strength in the first half of the month. Yesterday it reached as high as 101 before pulling back.
It seems that the rallies in stocks and the US dollar are on pause waiting for Janet Yellen.
Win some Trump Some
Finally, Donald's nominee for Treasury Secretary has been confirmed by the Senate and can get to work, presumably to cut taxes and deregulate Wall Street. Steve Mnuchin, a former Goldman Sachs executive, is best known for buying a failed bank during the 2008 financial crisis. A fact that has Trump critics up and arms on his Twitter feed.
Trump hit a road bump this morning as Michael Flynn, the National Security Advisor has resigned. Flynn was called out for sharing information with the enemy when he discussed details of the Russian sanctions with the Russian Ambassador.
Sorry, Trump. You win some, you lose some.
Playing Chicken with the World's Largest Economy
Janet Yellen is going to Washington DC today to testify before the Senate. This begins a two-day process of US politicians grilling the world's top central banker on everything from monetary policy to, well, monetary policy.
The current plan is to raise interest rates three times by the end of the year. At least, that was the plan as of December. What investors want to know is, is this still the plan?
If so, when should we expect the next hike? March? May? June? July?
These things matter and have a direct impact on the US dollar and all the other markets.
The problem is, Yellen herself is not in total control the economy. The biggest changes will be coming from the new President, a man who's strategy largely revolves around being unpredictable.
More aggressive tax cuts and government spending will cause the Fed to increase the rates at a quicker pace, while a lack of those things or delays will cause the Fed to take their foot off the gas.
Get The App
So Yellen's most likely strategy is to keep her options open. Not to endorse March as an option, but also not to squash the possibility. That way, if Trump decides to act the Fed can react.
Currently, the market is pricing in a 30% chance of a rate hike in March and a 75% for July.
A 30% chance for March is still low though. If she wants to keep it as a possibility, that number would need to come up a few notches.
Short term traders should watch the markets very closely as she speaks as every statement has the possibility to move the markets significantly.
What Else?
Bitcoin is surging this morning, up $13 a coin in the last 10 minutes. The volatility in this market is simply nuts.
The economic calendar is full today. We had some positive inflation numbers out of China last night. Up next we get inflation data from the UK and GDP numbers from Europe.
Before Yellen's speech, we'll also get the inflation numbers from the United States.
Stay on your toes. There's plenty of volatility and big swings to take advantage of so have fun.
Let me know if you have any questions or comments on the above. I'm always happy to hear your feedback.
Disclaimer: This content is for information and educational purposes only and should not be considered investment advice or an investment recommendation. Past performance is not an indication of future results. All trading carries risk. Only risk capital you're prepared to lose.
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.