European markets are picking up their direction from Wall Street where all three indices closed in a deep red territory. You can blame the energy sector for this, which was under pressure as crude oil came under fresh wave of selling. The economic data released yesterday over in the US has provided further fuel for this sell off as investors have once again started to think that there is so much weakness. Today we also have the option expiration, which will add more volatility in the market.
Yes, there is no doubt that traders do feel a little comfortable that the fed has removed one uncertainty by raising interest rate and delivering exactly what it was expected of them. The green back is enjoying its rally on the back of this strategy and it is trading higher against most major currencies. This raises the same question again which is if the US can handle the strength of the dollar because it will impact its budget deficit.
The data released yesterday for the US budget has shown that strong dollar is leaving its strong stains on country’s export number. Given that the dot plot suggests that the Fed will raise the interest four times next year, it will make the green back more strong.The Fed has ignored the strength of the dollar when they decided to raise to the interest rate and intact it is not the only elements which decided to ignore but a number of different factors were not given much importance either such as the US manufacturing sector.
Disclosure & Disclaimer:The above is for informational purposes only and NOT to be construed as specific trading advice. responsibility for trade decisions is solely with the reader.
by Naeem Aslam