4th Quarter is All About the FED

October 7, 2015

The last quarter of 2015 is most likely going to be fairly volatile. We still have the possibility that the FED will act some time before the end of the year, even though lately it seems rather unlikely. Some analysts speculate that there will be QE4 and/or NIRP before anything but for now, it is just a speculation. On the other hand, it is clear that the US economy is not growing at the same pace as it did in the middle of the year and from that perspective, a new QE program or cutting rates in to the negative territory, at the moment make more sense that hiking them.

In the beginning of this quarter, three main pairs - EURUSD, GBPUSD and USDJPY were basically in the middle of their 2015 ranges. To break those ranges we need something fairly substantial and to me it seems that the only one who can create such conditions is Ms.Yellen. Draghi can change the situation for the EURUSD but there is very little evidence that would suggest any larger changes in the ECB’s monetary policy this year.

Commodity currencies are the biggest losers of the year so far. All the three main commodity pairs – AUDUSD, NZDUSD and USDCAD made their 2015 lows very recently and at this point, it is hard to predict if those lows are going to hold throughout this quarter. Canadian dollar seems to lead the commodity block but that one is highly connected to the Oil price and taking into account the current mess in the Middle-East, I’d say anything can happen. At the moment USDCAD is droping like a rock and for the second time this year, it looks like „Buy the Fu*king Dip“ strategy is not doing its job.

In short, this quarter will be dominated by the Federal Reserve. What ever they will do or do not, will set the tone of the market until the end of the year.

Capital Properties FX