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Originally Posted by FXGenius
Mick thanks for the fundametal input the factors you mentioned are really promising for GBP. Now how likely it is that BoE will increase the rate once more Fed may hold the rate this time offcouse outcome of G7 meeting.
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A BoE hike by year end is more is less a done deal if CPI comes in stronger than expected next week it's just a matter of when the recent move up for the dollar has been short dollar covering. Couple that with a slowing US economy declining CPI retail sales support for the dollar starts to wane interest rate futures are pricing in just a 12% chance of the Fed going again in September (although that changes by the minute!). So compare the potential Eurozone UK interest rate direction to the US interest rate direction the yield differential starts to narrow.
The G7 is a big event risk as we saw on Thursday when Reuters misquoted someone saying Yen weakness would definitely be discussed dollar/yen dropped a cent in a few minutes. Not saying we'll see a repeat of last April but the risk is there as we all know it's 'buy the rumour sell the fact'.
The market has been totally focused on interest rates yield differential for quite a while now that's what has been supporting the dollar. Take that away what's left to focus on the twin deficits?
This is of course all speculation based on fundamentals entries targets need to be confirmed by technicals but right now I can't see any fundamental or technical reason for wanting to buy the dollar aggressively but quite a few reasons brewing to want to sell it.
My 2 cents......but I'd be interested to read an opposing argument.
As Boris Schlossberg says...
"technical setups elegant back tests beautiful equity curves are all very nice pretty but totally useless in real life. If you don’t underst the fundamentals behind your technical setup you will never succeed in the long run. That is why the game is so hard. Don't believe me? Ask the geniuses at LTCM."
Mick