Forex »

Central Bank Direction Key to FX

Swissquote UUIIFXBR
Share on StockTwits
Published on

FX risk appetite remains high driven by the strong performance of global equity markets despite the current weakness. Clearly the catalyst for this rally has been the surprise decision by the Bank of Japan to increase their monthly asset purchases (QQE)which stabilized investors’ fears. last week, the BoJ announced an acceleration of JGB purchases and also tripled their accumulation of ETF and J-reits. The Nikkei rallied over 4% and pulled the rest of global equity indices along for the ride. This risk positive news came just days after the Federal Reserve ended their own asset purchase program while producing a statement that was more hawkish then markets had priced in. For fundamental foreign exchange trading strategies this means only one thing. Buy USD. The USD was the big gainer across G10 and EM currency space. Gold and oil were also damaged in the USD surge. As investors rotated capital back into the US to take advantage of potentially higher yields, strong economic reports (including Q3 GDP growth at 3.5) helped push the shifting curve lower. The divergence path in the developed markets monetary policy will continued be the primary driver of asset prices for the foreseeable future.

Share on StockTwits