Over the next couple of days, we’ll see not one, but TWO potential catalysts that can dictate the dollar’s intraweek trends. Which one will you most likely trade?
After weeks of wheeling, dealing, and tweeting, Americans will finally elect 435 seats in the U.S. House of Representatives and 35 out of 100 seats in the Senate. Some state and local seats will also be up for grabs.
This year’s results are important for Trump, who has made headways on his campaign promises regarding taxes, healthcare, and trade but has yet to really work on infrastructure and further tax reform.
If Democrats win control of the House as pollsters believe, then Trump might have to dial down plans that need Congressional backing such as additional fiscal expansion and withdrawing from the WTO.
He might then have to focus on issues where he has executive power (e.g. trade policies) and even up the informal pressure (read: tweets) on the Fed, OPEC, etc. to achieve his goals.
If the Republicans end up taking control of the Congress AND the Senate, however, then we might see the Donald step up his policy game and fulfill his campaign promises in time for a second term in 2020.
FOMC statement (Nov. 8, 7:00 pm GMT)
After raising its rates in late September, analysts expect Governor Powell and his team to take a chill pill and hold their policies steady in November.
Take note that there’s no presser scheduled, so all the potentially market-moving points can be found in the statement.
Analysts widely expect the Fed to remain hawkish enough to push through with its speculated rate hike in December.
However, Fed members could also insert a cautious word or two especially after Uncle Sam printed weaker-than-expected inflation and consumer spending numbers.
Question is, how will the dollar players react to the release? Will they consider this week’s statement as a green light to price in another rate hike? Or will they respond to any and all signs of cautiousness and lighten up their long dollar trades?
Last Week’s Price Review
The Greenback is turning in a mixed performance for the week (as of 5:00 pm GMT). The Greenback is a net winner, though, so the Greenback is still on track for its third week of net wins.
And the reason why the Greenback’s a net winner is the stronger-than-expected NFP reading since that allowed the Greenback to recover from Thursday’s broad-based slump and score a win against the euro and the Loonie.
The Greenback had a steady start but caught a bid during Monday’s U.S. session, likely because of the risk-off vibes at the time, as well as a net positive consumer data, which kept Fed rate hike expectations alive.
Risk appetite returned during Tuesday’s Asian session, though, so the Greenback began to meet sellers.
However, the Greenback’s price action became more mixed after Trump said during an interview that he thinks that the U.S. and China will be able to work out ”a great deal.”
The Greenback’s price action would become somewhat uniform again during Tuesday’s U.S. session, though, since the Greenback caught a bid (except against CAD), thanks to the better-than-expected reading for CB’s consumer confidence index.
After that, the Greenback’s price action became mixed again on Wednesday, but became uniform again come Thursday.
Unfortunately for USD bulls, the Greenback uniformly slumped across the board on Thursday.
And looking at price action, it looks like the Greenback got a double whammy because of the news that China’s Politburo has hinted that more stimulus are being planned, which boosted the Aussie and the Kiwi, as well as a report from The Times claiming that Theresa May has supposedly hammered out a Brexit deal for the British financial services industry, which drove up demand for the pound and (to a lesser extent) the euro and the Swissy.
And as a final parting shot, the Greenback also got rushed by sellers on Friday when a Bloomberg report cited “four people familiar with the matter” as supposedly saying that Trump “has asked key U.S. officials to begin drafting potential terms” for a trade deal with China.
Thanks to the slide on Thursday and the final bearish kick on Friday, the Greenback found itself in third-to-last place after being a net winner from Monday until Wednesday.
Fortunately for the Greenback, the NFP report surprised to the upside since the report showed that 250K non-farm jobs were created (+194K expected), while wage growth was within expectations (+0.2% as expected).