Yellen Had No Surprises

Friday may make Russian investors nervous. First, as usual on the stock market, traders may start taking profits before the weekend. Second, the Bank of Russia meeting and interest rate decision are right around the corner. The prediction is that Nabiullina will not toughen monetary policy. We think that the Central Bank just might lower the rate 25 basis points, but time will tell. For now, the high price of oil, which rose strongly on the drop in US supplies, is propping up the Russian market. Tomorrow, the volatility of Brent crude may be higher on the publication of data on the number of drilling rigs. The Bank of Russia’s international reserves rose to almost 415 billion dollars.

And Yellen had no surprises yesterday. The euro managed to jump past 1.1700 briefly, but resistance for the pair remains strong. The probability of an interest rate increase at the December meeting is now estimated at 57%, which is not very high. Tomorrow the second quarter GDP number may help the dollar. The forecasts are optimistic. Traders may be watching the remarks by Neil Kashkari, president of the Minneapolis Federal Reserve Bank. You will remember that not long ago Kashkari came out against raising interest rates, and at the last meeting he also voted for keeping the rate unchanged.

In addition to the United States, second quarter GDP data will be published in a number of European countries, in particular France and Spain, and in Canada. It is anticipated that Canada’s economic growth rate will remain at 0.2%. Meanwhile, Prime Minister Justin Trudeau yesterday voiced concern about overly drastic actions by the BoC with respect to toughening monetary policy. You will remember that, subsequent to the United States, the Bank of Canada raised the rate, and one more increase is planned before the end of the year. Yesterday the US dollar rose against the loonie, but this may be only an additional opportunity to open short trades. In the mid-term, on the weekly charts the next strong support is at 1.2044.

Nikolay Dudchenko, Olymp Trade

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