Euro Traders Focused on the German Election and the ECB Meeting
Brexit Bill Stalls Negotiations
Fed Members To Create More Volatility
Sea of Red Across Global Markets | Currency Markets Volatile | Gold Sharply Up
There is a sea of red across global markets. European futures are trading sharply lower and picking up the momentum from Asia. North Korea has further escalated the geopolitical tensions over the weekend and the US has called for an emergency meeting of the U.N council. For investors, this does not present a stable environment for investing. Hence, the risk off trade would become more prominent until the dust settles.
The US is looking for more sanctions and President Trump is making clear over and over again that talks only are not going to help. He has called North Korea’s action as "hostile and dangerous". The Chinese and the Russians have also shown their strong response to North Korea’s reaction. Other safe haven currencies such as the Japanese Yen and the Swiss franc would also find strength due to this situation.
The risk of immediate military action on North Korea by the US is still somewhat remote as the president hasn’t provided any clear direction when he would adopt a more dangerous route. So far more economic pressure would be used in the form of strong sanctions.
Euro Traders Focused on the German Election and the ECB Meeting
Over in Germany, it is all about the upcoming election which is not only going to shape the future of the biggest economy of the euro zone but it would also have an enormous impact on the euro if an unfavourable result becomes a reality. The refugee crisis is at the heart of this election, and the recent TV debate between Angela Merkel and Martin Schultz was very much focused on this issue.
Currency traders are going to stay on the edge and remain anxious ahead of the most important event of this week. The European central bank’s meeting is on Thursday and policy makers could be announcing their next policy move. The pressure on the policy makers is sizeable due to the improving euro zone’s economy. After the latest announcement by the ECB during which they said that the tapering process could be pushed towards the end of this year, currency traders have largely priced in no move in the ECB’s policy (due this week).Of course, anything which is not in line with the ECB’s communication would be worrisome for the markets.
Brexit Bill Stalls Negotiations
As for Brexit and sterling, it is more about the Brexit bill for the time being. It has blocked all further communications and the entire process is in gridlock as it was expected. The Brexit secretary has called the £50 billion divorce bill as non-sense. But we all know that without paying their bills, there will be no trade talks and this would take more toll on the UK’s economy.
Fed Members To Create More Volatility
For the dollar index, the underwhelming jobs data and catastrophe caused by Hurricane Harvey are going to keep the stellar Q2 GDP in the shadow. A large number of Fed officials are slated to make their speeches this week and the contrasting views of the voting committee members would only make the ground more infertile for the dollar bulls.
