Neil Davies, Head of Trading at PlutusFX, sees a strengthening USD.
USD continues to strengthen against the Euro, currently standing at EUR/USD 1.2885, having seen a recent Euro peak of 1.399 on 8th May this year.
The last four months have seen continued poor figures from the Eurozone, combined with economic strength in the USA, resulting in a steep decline for the Euro.
This trend continued last night despite the Federal Reserve re-iterating that it will not raise interest until a considerable time has passed after the end of its bond buying programme, which will cease in October. As well as the currency firming, Stock markets also strengthened, with the Dow Jones hitting an all-time high. The predictions on when rates will start to firm, up from the zero short term rate set in 2008, is where the markets are now focused. Indeed, the phrase “considerable time” that Janet Yellen has used to describe when rates may rise has had to undergo a definition change, being originally ‘roughly six months’, now with no time attachment at all, being ‘data dependant’. Such are the subtleties that move markets in an age where central bank announcements are so benign.
With regard to Data, inflation figures for August showed a 0.2% fall in prices, bringing annual inflation in at 1.7%. Despite some descent from some of the Fed’s board who are in favour of a tightening earlier rather than later, the phrase of the moment may remain in place….for some considerable time.
