Key Points from This Week
US Dollar Rally
The US Dollar has seen a fresh surge in buying this week following months of sell off. The uptick in buying came in response to a slew of positive data kicked off by a solid rise in the US ISM manufacturing reading. The ADP employment reading, which actually undershot expectations slightly, then offered further support with the reading marking a firm improvement on the prior month. Weaker than expected weekly jobless claims then saw further USD buying into the back end of the week, along with a better than expected ISM non-manufacturing reading
Equities Breakout Continues
The rally in US equities has been the big move of the week with the S&P500 breaking out to new, record highs. Investors have been buoyed by the Fed’s recent announcement of a shift in inflation strategy. The Fed has shifted its stance and will now allow inflation to run above its 2% target. With US rate hike expectations having been scaled back accordingly, equities traders have once again been given the green light.
Key Events Next Week
Bank of Canada September Meeting
At the BOC meeting next week, the market is not looking for an adjustment in monetary policy given the ongoing recovery which is underway. However, traders will be keen to hear the bank’s latest assessment and forward guidance. Of particular note will be the BOC’s view on the recent CAD appreciation against the Dollar and whether this might lead to further BOC intervention.
European Central Bank September Meeting
The ECB meeting next week will be the main focus of the week. Following comments from the ECB’s chief economist this week who pointed focus towards the recent moves in EURUSD, traders will be keen to see if the central bank attempts to further talk down the Euro, especially in light of the Fed’s recent change in inflation strategy which has created clear upside pressure in the pair.
Keep An Eye On
While Brexit trade talks are still underway, recent headlines have raised concerns over the prospect of the talks failing. With both sides still highly opposed over several key issues such as EU fishing access to British waters and EU demands for Britain to comply with its regulatory standards, time is fast running out and the risk of a no deal exit from the single market have visibly increased.
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