The consolidation in most of the major Forex pairs continued into this week. The consolidation began several weeks ago and appears as though it may continue into the Holiday Season. The closer we get to the end of the year the more thinly traded the markets will be so liquidity will definitely be something to take into account. It is impossible to predict how markets will react to reduced liquidity but as always it is best to let the market make the first move and then react to that move rather than to try out guess it.
The calmness or lackluster movement in the Forex market may have allot to do with the Federal Reserve announcement around short-term interest rates. The announcement is scheduled for Wednesday 12/19/2018 which is expected to be another rate increase bringing the short-term lending rate up from 2.25% to 2.50%, this would be the fourth rate hike this year. What we have been seeing in the market could be the calm before the eventual storm because if there are any surprises at all the value of the USD is sure to make a move one way or the other. The timing of this announcement is a little inconvenient in the respect that a few days later we are headed into the Holiday week which can be a slow week since allot of traders are out of the market until the New Year. If that is the case this year, we may not see much sustained movement for the next few weeks, but the good news may be that there is speculation that the Fed will reduce the number of planned rate hikes in 2019.
The USD did end up making a move against the EUR gaining against it this week though that move really came about when the London session began to trade on Friday morning. USD gained against the JPY, it gained early in the week against the GBP but gave about half of it back as the week progressed only to regain much of what it gave back on Friday. USD remained flat against the CAD but it made a move against the CHF gaining back much of the previous week’s losses. Early in the week, the AUD made a nice move against USD but USD punished the AUD late in the week taking back its early losses and more.
Brexit is the ever-looming story for the GBP and also the EUR to an extent. This week did answer some questions around how much support the UK Prime Minister really has and as it turns, she has just enough support to keep her job. She still needs to negotiate the Brexit deal that she has been hoping for, but it doesn’t appear that the EU countries are overly motivated to help her, though they keep saying that they are, and there is still allot of opposition for her at home in the UK. This is a story that will dominate the GBP performance for at least the next few months when the official breakup occurs. This week it did make a move against the JPY, but the JPY took back at least half of that move on Friday. The EUR made a big move against the GBP early in the week, but it gave most of it back ending up about even for the week.
The EUR was largely even against the AUD and the JPY while losing some ground to the CAD and CHF.
About Bill Poulos
Bill Poulos is the President and Co-founder of Profits Run, Inc. The company creates materials to help an individual make smarter investment while minimizing risk. Bill has an engineering degree from GMI and his MBA (with a degree in finance) from the University of Michigan. He began studying stock markets as early as 1974. Bill Poulos reviews his own experience and knowledge with the members of Profits Run. He contributes frequently to online platforms, such as LinkedIn, Investing, yours.org, and here on Medium. For more information on the state of the market, read his article December Begins on a Volatile Note. Bill resides in Michigan with his wife, Karen.