IT’S A massive week for US markets, with both the GDP print and the all-important two day Federal Open Market Committee meeting. Fed chair Janet Yellen will be looking to either dispel rumours or confirm the fact that we are very close to the first rate hike in the US in almost 10 years.
So with this in mind, we are likely to see US assets tread water before the big numbers later in the week. But that may not mean that there are no opportunities in the markets. The greenback won’t be left totally alone either, as commodity-based crosses give traders ample opportunities for trades.
After last week’s Reserve Bank of New Zealand decision to cut interest rates, New Zealand dollar-dollar jumped higher back above the $0.6600 level. Holding onto it, however, was always going to be the bigger issue, and so far things are working out OK on that front.
With more interest rate cuts in the pipeline, eToro’s social network, the OpenBook, where clients can collaborate and share trading ideas with full transparency, is showing that 67 per cent of more than 3,000 of our clients are long the pair, expecting the $0.6600 level to hold and the gains to continue, at least in the short term.
However, with so much resting on the position of the Fed over the remaining months of the year, this week will be pivotal in whether that $0.6600 level can hold or whether we will see a swift turnaround in sentiment before the end of the week.
James Hughes is chief market analyst at eToro.
eTORO investment analyst: Mati Greenspan
The fall in Chinese stocks is a worrying point for the world economy and especially investors with Chinese exposure. The threat of yet more downside, despite government intervention, will have investors worried around the world, especially as we run up to a US rate decision and GDP readings.
With negativity in China and the prospect of the Federal Reserve removing stimulus, we could see the risk-averse trade come back to the front, with money flocking back into gold and the commodity currencies such as the Australian and New Zealand dollars. If the selling continues in China, what steps if any can the government take to make sure all out panic doesn’t set in?
City A.M.'s opinion pages are a place for thought-provoking views and debate. These views are not necessarily shared by City A.M.