A game changer of a week as hawkish central bank commentary steamrolled the markets. And as the G-10 central bank band plays on, traders are now contemplating who will be next to join the lineup. No one wants to miss out on this party realising there’s a coordinated policy shift afoot and the chance to catch the removal of an easing bias is far too seductive for traders to ignore.
Euro
EUR continues it’s relentless march higher driven as much by an omnipresent apprehension that one is missing out as it is about conviction. But the groundswell of support for the euro is undeniable as traders see this as a rare opportunity to catch a ride on the wave of shifting policy.
After peaking at near 113.00 on the upside surprise to Q1 US GDP data, a broader shift in risk sentiment sent the pair toppling to below 112 before regaining some traction. Double-digit percentage corrections on the NASDAQ are unsettling investors and risk has turned sour.
Australian Dollar
Jumping on the bandwagon appears to be the trade of the day. Everyone including their dog is clamouring for the top side of exposure on the Aussie as the markets contemplate the possibility the RBA will join the ensemble of hawkish central banks. And while a rate hike is highly unlikely next week, shifting out of neutral would be sufficient to provide the spark to push Aussie even higher. If there was ever a case made for fear of missing out, I suspect we see that reflected in current AUD price action.
Looking at the day ahead
The depth of today’s economic calendar is of epic so that traders will be glued to their screens most of the day…so back to it.