Category Archives: Bulls&Bears
American elections, the strangest and harshest in recent history, are coming to an end in just few days when American electorate will decide who will be the next US president. Nonetheless, the election process seems having not reached its peak in terms of “external perturbation”. Firstly, the leaked tape with Trump’s comment on women, then the massive Russian (according to US agencies) cyber-attack and Assange’s WikiLeaks, and lastly the “unprecedented” interference of the FBI in a critical moment for the candidates and their campaigns.
James Comey, appointed Director of the FBI under the Obama administration, over-ruled a precise order from the Department of Justice to avoid any communication with the Congress regarding Clinton’s mail investigation. The FBI Director sent on Friday a letter to the Congress in which he communicated that the investigations will be reopened on the basis of new findings. Hillary Clinton called this move: “unprecedented” and very recently, Republican Senator Charles E. Grassley from Iowa expressed serious concerns about the foundation and the significance of Comey’s findings: “Unfortunately, your letter failed to give Congress and the American People enough context to evaluate the significance or full meaning of this development”. Nonetheless, the campaign had already been deeply influenced. New polls suggest that the distance between the two candidates has dramatically decreased.
Financial markets do not like uncertainty and on Friday, during the second part of the trading session when European markets were already closed, Comey’s declarations, offset gains and optimism triggered by GDP results above expectations: 2.9% YoY. Yesterday, all major European indexes reported losses and the DJI closed at 18142, -0.1%. One thing is sure, we should brace for much more volatility and downward pressures.
EUR/USD Week Recap | 18th-22 th May 2015
This past week, The EUR/USD pair followed a bearish trend, starting its decline back on Monday going from 1,1466 to the three weeks lowest level of 1,1013 as Friday 22th. EUR depreciation was expected as an ECB Officer recently spoke about a boost of the QE in the months of May and June, as a manner of contrast to the expected bond market slowdown in July and August. QE is generally negative for a currency as it contributes to drive rates down. On top of this, Greece troubled position still remains unclear to the market and an exit could not still be excluded, and this event for some could be as harmful for the European Financial Markets as the Lehman’s chapter 11.
On the other side, US economy is performing weaker than expected as shown from data such as manufacturing and retail sales that led to a downward revision of the first-quarter annualized growth rate, initially estimated at 0,2%. Moreover, consumer spending is generally low, even though an increase due to low oil price was expected and this brought concerns about the status of real economy. Industrial and manufacturing production are still below expectations. For these reasons, several FED officers strongly believe that the interest rate hike will definitely be postponed.
Next week it is expected to be very calm for the EUR/USD pair, as very few new macroeconomic data of minor importance will be released. According to my analysis, unless some changes occur with Greece, the EUR/USD pair will keep stable with minimal EUR depreciation (EUR/USD goes down) as the overall outlook of the American economy seems more substantial and stable than the European one.
Ludovico Buffo, Master Student