28 June 2018
Interest rate policy divergence continues to dominate this pair. The ECB is not actively raising rates, so the dollar gets stronger. As it is doing across all currency pairs now. The Fed have set out their rate schedule until 2019. Any Euro-positive moves will come from changes in the ECB policy triggered by inflation as usual. Tempered by speculation over the end point of the Feds moves, 3.25 is priced in, traders are looking at 0.25 either side.
Tax changes are priced in, trade wars are not worrying the markets yet. The S&P is range-bound, no collapse or sell-off foreseen. These noisy factors in the media have turned out to be much less of an issue than feared.
The ECB drives the Euro, they pushed it down to help the peripheral economies, it’s up to them to let it back up. The Greeks are now leading GDP growth in The Zone, ‘normalisation’ talk is in the air. QE starts winding down in Q4. Rates will be next on the agenda. Greece won’t like this change in direction but that is the nature of EU economic policy making. Germany and Greece are at opposite ends of the rope.
Dollar strength, or Euro weakness, will present opportunities to buy into commodities. Gold is heading for the bargain basement already, will it bounce in September to mark the end of ECB QE?