Fed minutes made dollar weaker
Jamie Dimon bets on Trump’s one term of presidency
Hammond delivered a poor budget
ECB reviews corporate bond buying
European markets are trading lower despite the fact that the German GDP YoY number matched the forecast of 2.3%. The German export number, the backbone of the country, has endorsed once again that it is the primary driver of the GDP growth. Thanks to the recovery in the global growth demand and lower euro which are providing a tailwind for this. The economic engine of the eurozone is in excellent order and given the gridlock around the Brexit negotiations and the new lower growth forecast in yesterday’s budget, it gives Germany a much stronger competitive edge in the eye of the investors. Moreover, the French Nov. business confidence also came ahead of the forecast. It printed the reading of 111 while the forecast was 109.
Two pairs, the EUR/USD and the EUR/GBP, are enjoying their gains today while traders are keeping an eye on the outcome of the meeting between President Steinmeier and SPD leader Schulz. German party leaders do feel that they have a responsibility to form a government and the SPD leader has said that he is open for another round of talks with Merkel. If we do see more tangible progress which helps Merkel to finally form a coalition, we do think that the Euro could move higher and the EUR/GBP could surpass the mark of 0.90.
Overall, traders are debating about the dovish Fed minutes and this is dragging the markets lower today. We do expect the volume to be on the lower side as traders over the US side have hit their homes for the Thanksgiving break.
The dollar bears have one more reason to enjoy Thanksgiving because the Fed minutes brought good news for them. The Fed minutes confirmed that the path of the interest rate may not be that steeper for the next year as compared to this year because some Fed members are offbeat about inflation. Even though another rate hike in December looks like a done deal, but it was more of the future path of the interest rate hike which took the wind out of the dollar rally. The Fed is surely optimistic and confident about the job market and the general economic activity hasn’t deviated much from their expectations. To predict the future projection of rate hike path has become even more difficult path and this is primarily due to the new upcoming composition of the Fed members. Having said all this, it does appear that the dollar index is holding its losses at current level
The weakness in the dollar index has provided a fresh catalyst for commodities to continue to move higher. The theme which would support the commodity price in 2018 is that companies around the globe have become less cautious and a vast number of them ramping up their investment expenditure and this would support the commodity price in 2018.