Market Update – October 17, 2017

Market Update – October 17, 2017

Slowly but surely, we get closer to the most critical trading week in the month, and it isn’t this one. Next week the ECB and BOC will drive prices on both Euro and Canadian pairs.

 

Until then, it is unlikely that the market participants will take chances. As such, ranges expect to hold.

 

Japan Gets Ready for Snap Elections

 

Japan prepares for elections next weekend, as Abe called for snap ones to be held. Polls favor Abe to win, but it depends much on the number of the votes we will get.

 

The Abenomics brought so far only JPY depreciation, while the Japanese stock market is close to all-time highs. As such, Abe’s win may mean a lower JPY for the period ahead.

 

Because of the elections, it is unlikely that the JPY pairs will move much this week. If anything, EURJPY seems to be well bid into the dips, more than the USDJPY pair.

 

In any case, until we’ll know the outcome of the election, the JPY traders will sit on their hands. Looking at the other possible pairs for direction, there’s little or nothing to see. Except for the Euro.

 

ECB Expected to Announce Unwinding the Bond Buying

 

ECB promised that it’ll announce its plan to unwind the bond-buying program this fall. As such, next week’s decision has a chance to be a historic one.

 

With the European economies running at full cylinders, the only thing that misses is inflation. It is quite ironic that central banks these days look to create inflation, but it simply means to fill the mandate is not that easy.

 

Each economy has its particularities, yet central banks try to apply the same measure to them all: a 2% inflation target.

 

Except in the U.K., that saw today inflation rising to 3% (it is no wonder due to Brexit effects), inflation is nowhere to be seen. Not even in the United States, as last Friday the CPI disappointed.

 

Still, the Fed vowed to hike rates one more time this year, and many Fed members look for another 2-3 or even more hikes next year. Is inflation becoming secondary to jobs data in the United States?

 

Conclusion

 

October so far has been a ranging month. Little or no movements, with traders losing their patience.

 

Ahead of the end of year holidays, some events may bring back the desired volatility. However, we can already say the principal trade of the year was long EURUSD from 1.05 to 1.20, as is unlikely we’ll see an equivalent move in the remaining months.

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