Tripeak’s Lawrence Fayman sits down with FXDD Global’s Chief Currency Consultant Stephen Simonis Sr. to Discuss Geopolitical Market Events
In mid-March of this year, the federal reserve raised interest rates by 0.25% to between 0.75% and 1%(the official rate after the hike is 1%). Although the markets seemed prepared for this event, the impact of the rate hikes were felt across the globe.
FXDD Global’s chief currency consultant, Stephen Simonis Sr., had this to say: “As expected, the Fed raised rates but traders were clearly more interested in Janet Yellen’s comments. There was no reassessment of the Fed’s economic outlook and she said near term risks to the outlook appear ‘roughly balanced’. Minnesota Fed President Neil Kashkari may have helped push the dollar lower with his dovish tone. It seems to us that this is a classic buy the rumor, sell the fact scenario as we cannot help but think the market is heavily long of dollars. While the dollar sell off may last for a day or too our thinking is that buying these USD dips is still a good strategy.”
Investors are asking: how many more rate hikes will we see this year? Will the market be as prepared as it was for the last hike? However, the fed hikes are not the only market mover that is top-of-mind for traders. There are many other events that have investors alert. FXDD is making investors aware of the new U.S. and China relationship, as well as other geopolitical issues including the U.S. missile attacks on a Syrian airfield, and analysis on the Australian economy. Simonis said, “President Trump and Chinese President Xi Jinping agreed to a 100 day plan for trade talks. Commerce Secretary Wilbur Ross said the plan will boost U.S. exports and reduce the U.S. deficit with China. Ross further commented, “Given the range of issues and the magnitude, [reducing the deficit] may be ambitious, but it’s a very big sea change in the pace of discussion. I think that’s a very important symbolization of the growing rapport between the two countries.” The summit ended with no confrontations between the two sides and President Trump said “tremendous progress” was made and the U.S. relationship with China is “outstanding.” These are all positive signs toward improved bi-lateral relations, especially considering that the U.S. missile attack on a Syrian airfield happened during Trump and Xi’s meeting, as well as China’s ongoing problem with North Korea. Market investors and traders will look at this as a solid beginning to the new U.S. administration’s relationship with China moving forward. Amidst all the uncertainty surrounding trade and fiscal policies right now, if indeed the world’s two biggest economies can work together it bodes well for global markets. We think the yuan and the dollar will gain ground across the board.”
He added, “The world is clearly fraught with geopolitical risk around every corner. Terrorist attacks in Russia and Sweden along with the U.S. missile attacks on a Syrian airfield in response to a horrific nerve gas attack on civilians have investors on edge. The attacks by the U.S. have strained the recent slightly improved relationship it had with Russia. China also has an ongoing problem with North Korea launching missiles seemingly every other day. With all these worrisome spots and other troubles lurking, traders are looking for any port in the storm. The world has changed and investors and traders must adapt or be left behind. Traders are looking for safe havens such as gold, swiss francs and the yen. It looks to us that safe havens will benefit from this unsettled environment for some time to come.”
Simonis’s thoughts on Australia are as follows: “Australia’s growth has been undermined by population gains and resource exports to China. Failure to spur significant productivity has led to a stagnant economy. Household debts are at levels that could lead to financial instability. The RBA has mentioned their concern over the debts and are worried it could lead households to curb spending. We were hoping to see higher levels in the AUD in order to sell however that scenario dose not seem to be developing. We are bearish on the aussie dollar and are looking for a move to the .7300 – .7350 level.”
For more information or you would just like to chat about the market please contact me at lfayman@Tripeak.com – Lawrence Fayman