After the thin volume by high volatility of last week we could well be looking at more of subdued start to the week as volume returns and US traders returning to their desks try and decipher last week’s moves.
With big moves on the euro/U.S.dollar (EUR/USD) currency pair, it would be no surprise if that got the biggest amount of attention. Friday saw EUR/USD surge through the key upside levels at 1.1886 to post fresh two month highs, despite the unclear political situation in Germany. After talks broke down last week, you could have been forgiven for thinking that either the Dax, the Euro or in fact both of them were set for some kind of fall as the political limbo continued. What we in fact saw was both rally and close in string positions ahead of the new week.
With the new week comes fresh hopes that a coalition can be thrashed out with the SPD, therefore avoiding more damaging election in 2018, it’s a story that will develop throughout the week and be a key driver for the Euro.
Bitcoin! As much as we don’t like talking about it, it has pushed higher again gapping on the open Sunday night and continuing at pace throughout this morning’s session to post fresh new highs of $9724. The talk has been whether the headline crypto currency would be able to test the 10,000 level before Christmas, now it looks inevitable that we will see that level this week! Bitcoin has put on a mere 869% year to date. With Bitcoin it becomes incredibly hard to find reasons behind a lot of the moves, with a many putting this recent move down to a surge in retail trades. With Jamie Dimon’s words still ringing in BTC traders ears, it is becoming hard to ignore the popularity, and more importantly the surge in price of crypto. Of course the biggest issue with Bitcoin is that with no government backing or regulation, the gains may be big, but the sell offs can be equally as drastic.
What do we expect this week?
For Monday it looks like a fairly subdued session, especially on the economic calendar as European data is nonexistent while U.S. date is thin on the ground, however, as mentioned previously we must take into consideration the return of U.S. traders after the Thanksgiving break. The key data out of the United States will come at 15:00 UK time with new home sales data, as well as the Dallas Fed manufacturing index.
The U.S. dollar has been under pressure this last week, and has led to the likes of the Euro and Sterling positing strong gains despite having problems of their own. The Fed stance on inflation is one of the key drivers behind weakness, despite the fact we look set for a rate hike in December. The Fed meeting minutes on Wednesday showed that despite the softer inflation readings members still support a December rate hike. This stance could mean that as we go into 2018 we could be looking at at least 4 rate hikes, even if inflation remains stubbornly where it is.
Overnight Asian markets found their feet and managed to push on into positive territory, however that has failed to give European indices too much of a shot in the arm on this Monday morning. The U.S. dollar continued its weakness overnight which saw AUD/USD move to 0.7615 and USDJPY post lows at 111.22 on the downside. With U.S. GDP and a host of Fed speak this week which could well give us hints to December and 2018 policy we have the potential for a bit of a shake up for the greenback, however the dollar index does look like it is now starting to get settled into this downward spiral.