Events in October are Likely to Stir Up the Forex Market

For this weeks global financial market, big events are likely to cause some ups and downs on the currency market dominated by US dollar.

On Wednesday, October 9th, US Federal Reserve released minute of the monetary policy meeting on September 17th -18th . The record showed major division within the Fed, and decision for a further rate cut is unlikely to be made on Octobers meeting.

The released documents showed that though most members agreed on the necessity of cutting interest rate, the opinions are still sharply divided in terms of future policy. “The minute is generally neutral, but you can clearly see the division between the Doves and Hawks”, US economist Esparaza said. “They share the same view about US economic growth, but have different opinions about the future path.”

Fed policy-makers are worrying that weak business investment, trade and manufacturing sector may weigh down on consumer spending, which has been the major driver for US economic growth in recent years. The minute shows that between the meetings in late July and mid September, theres clearly a sluggish trend in investment, manufacturing and export, which echos the global economic slowdown and uncertainties in trade policies.

Meanwhile, China‘s Vice Premiere and top trade negotiator Liu He led the Chinese delegation to Washington on October 10th ~ 11th for a new round of high-level trade negotiation with US trade chief Robert Emmet Lighthizer and Treasury Secretary Steven Mnuchin. “The market is waiting to see how the trade talks go on Thursday, and a negative outcome is likely to inspire strong risk-aversion.” Analyst from Phillip Futures Benjamin Liu observed. Other analysts also noted that good news from the trade talks can boost the market’s risk appetite and weigh on the safe-haven asset Japanese Yen; but if the negotiation isnt smooth, risk aversion will continue to prop up the Yen.

As US President Trump earlier said that US will raise tariff against China on 15th of October if no progress is achieved in the negotiation, the market is particularly sensitive to how the trade talk evolves.

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