The lull of the market
An aimless walk in the narrowed band in the foreign exchange market signal a temporary “calm” in the mood of investors, which are already turning to New Year preparations and are paying less attention to the market catalysts that have been actual until recently.
Tax reform and the US Dollar
Republicans are getting ready to receive Congressional approval for fiscal stimulation and to hold a final vote next Tuesday, but the US currency seems to show a tepid reaction to this. The chances of disappointment are scanty, given that the Republicans have a majority in the Senate and any resistance from the Democrats is meaningless. The US currency is likely to receive support from the news about adoption of the reform, but it will not be able to change the global trend, as it happened earlier this year, as there is nothing to “buy on rumours”. In addition, the rep of Federal Reserve Neil Kashkari who all year countered rate hikes, added pessimism to the sentiments saying he will strictly adhere to data-dependence and wait for evidence of achieving inflation of the target level in 2018.
The key target for inflation FED Core PCE rose in October only to 1.6% in October. And this is only due to the effect of natural disasters.
The Euro was able to strengthen a little on the signals of political stability in the Euro area as Angela Merkel seems to have found allies to create a coalition. However, negotiations will begin only in the new year, which is not so important. From the macroeconomic data, the German business climate index from the IFO Institute also probably will not have a noticeable effect on the Euro.
The global growth of the Australian Dollar
Prospects for the global growth of the AUD/USD in 2018 were strengthened after RBA expressed confidence in a stronger economic growth next year in its protocol, hinting the transition of the policy tightening which the economy had been waiting for seven years.
Oil prices remain positive due to outages in supplies through the Forties pipeline, one of the largest transporting Brent. The repair period, according to the representative of the company Ineos remain two to four weeks. The effect of the production cuts by OPEC and the group outside the organization, including Russia, remains unclear since the competitors from the US meanwhile have increased production to the level of Russia and Saudi Arabia in the aggregate volume. EIA reported that production will continue to grow and that makes it difficult to estimate the long-term balance of supply and demand in the market. Local factors will likely remain the main drivers for price changes, as globally the market is in a stalemate.