(21 SEPTEMBER 2018)DAILY MARKET BRIEF 2:USD slides ahead of rate hike
The American economy has underwhelmed: the Federal Reserve will raise rates only 0.25% next week. Lack of a steeper hike has taken steam out of the USD rally and given risky emerging markets room to recover. The Turkish lira recovered, despite an inept economic plan. EUR/USD is near the top of the midterm range located at 1.1851. Euro Stoxx 50 futures are up, following the lead of U.S. stocks, which hit other record high, and Asian stocks that followed the US optimism.
US Treasury 10-year yields remain above 3.07%, rising but still historically low. Perhaps the market is mispricing the top of the Fed interest rate cycle. Risk appetite should remain buoyant, even though there are plenty of risks including rising trade tensions, Brexit, October German elections, US mid-term elections, Q4 corporate earnings and general geopolitics. Buy risk and volatility, but trade nimbly.
By Peter Rosenstreich
