FOREX 4 minutes to read

NY Open: Waiting for the other shoe to drop

Summary:  Markets have grown increasingly uneasy in the wake of the latest Fed meeting, the nonfarm payrolls blowout, and yesterday's State of the Union.


Traders have had a lot to worry about since last week, including the Federal Open Market Committee meeting, the nonfarm payrolls report and the State of the Union address. Those shoes have dropped, as have all the G10 major currencies against the US dollar. The only exceptions are the New Zealand dollar, which is unchanged, and the Canadian dollar which scraped out a small gain.

Traders are looking for the next plunging shoe and don’t know if it will be fluffy slipper or a steel-toed work boot.

The Bank of England monetary policy decision and quarterly inflation reports are on deck. Bank of Canada governor Stephen Powell, Federal Reserve chair Jerome Powell, and Reserve Bank of Australia governor Philip Lowe have all flip-flopped on policy statement messages in the past few weeks. It would not be much of a stretch to think that BoE governor Mark Carney follows the same playbook.

Brexit was a significant concern at the December 20 meeting. The statement said “Brexit uncertainties have intensified considerably since the Committee’s last meeting. These uncertainties are weighing on UK financial markets.” It went on to say those concerns were weighing on growth and the currency.

Brexit developments took a turn for the worse since that meeting. UK MPs resoundingly defeated Prime Minister May’s Brexit plan. The new strategy is to renegotiate the deal, something that European Union officials have said isn’t going to happen.

Elevated no-deal Brexit fears may be enough for the BoE to issue a dovish statement and open the door to a rate cut.  

Wall Street is following yesterday’s rally with a retreat in early New York trading. President Trump didn’t provide any new information or details on infrastructure spending in the SOTU last night, which may be weighing on equity prices. Traders ignored news that the US monthly trade deficit narrowed to $49.3 billion in November.

Enlarge
GBPUSD (four-hour, source: Saxo Bank)
Disclaimer

Saxo Capital Markets (Australia) Pty Ltd prepares and distributes information/research produced within the Saxo Bank Group for informational purposes only. In addition to the disclaimer below, if any general advice is provided, such advice does not take into account your individual objectives, financial situation or needs. You should consider the appropriateness of trading any financial instrument as trading can result in losses that exceed your initial investment. Please refer to our Analysis Disclaimer, and our Combined Financial Services Guide and Product Disclosure Statement. All legal documentation and disclaimers can be found at https://www.home.saxo/en-au/legal/.

The Saxo Bank Group entities each provide execution-only service. Access and use of Saxo News & Research and any Saxo Bank Group website are subject to (i) the Terms of Use; (ii) the full Disclaimer; and (iii) the Risk Warning in addition (where relevant) to the terms governing the use of the website of a member of the Saxo Bank Group.

Saxo News & Research is provided for informational purposes, does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. No Saxo Bank Group entity shall be liable for any losses that you may sustain as a result of any investment decision made in reliance on information on Saxo News & Research.

To the extent that any content is construed as investment research, such content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication.

Please read our disclaimers:
- Full Disclaimer (https://www.home.saxo/en-au/legal/disclaimer/saxo-disclaimer)
- Analysis Disclaimer (https://www.home.saxo/en-au/legal/analysis-disclaimer/saxo-analysis-disclaimer)
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)