Don’t rely on Chinese takeaway, EUR/USD vol finished for the year

James Hughes, Chief Market Analyst at eToro, joined Tip TV today to discuss the impending BoE and Fed rate hikes, and a quick overview of the currencies.

Bank of England to hike before Fed?

Hughes commented on the importance of the inflation report being released this week in the UK, and he expresses his view that good inflation numbers along with strong unemployment and good GDP results last week can ultimately lead to a UK rate hike before a US hike, and all before the start of next year. However, he does raise the concern of a market spook if the UK was to raise rates before the US, and thus it is likely Carney will drip feed the rate hike in the UK.

Fed unlikely to hike rates until at least 2016

The average GDP numbers in the US, means for Hughes that Yellen won’t raise rates in September as they were not as strong as they could be. Unlike previous years, Hughes commented on the lack of importance of nonfarm payrolls as the volatility surrounding them has died down. He also highlights the need for a run of positivity in the US before the rate hike is to come.

EUR/USD not bothered, whilst USD/CAD to go higher

Hughes noted the limited ability of anything, even the 25% fall in Greek markets after reopening, to affect the current EURUSD stance, with the UK and US rate hikes the only event likely to have a future impact. Meanwhile, for Hughes, the USDCAD continues to break nice levels and his only fear remains Canadian data.

Dangerous relying on Chinese government

Hughes finished by noting that sooner or later, the emergency measures in place will have to be removed by the Chinese government, and this could place the market in a dangerous situation.