Dollar Dips on NAFTA Uncertainty, Bears Eye 93.50

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It was already shaping up to be a negative trading week for the Dollar as easing trade concerns dented the currency’s safe-haven appeal.

Buying sentiment towards the Greenback deteriorated further on Thursday following reports that the US and Canada are unlikely to reach a breakthrough on NAFTA talks this week.  Although the expected uncertainty may support the Dollar, investors seem more concerned about how NAFTA developments may impact the US economy. The initial optimism over the United States having less to lose from trade tensions seems to be wearing off, and this remains one of the factors behind the Dollar’s depreciation. If trade disputes result in slower US economic growth, King Dollar could easily lose its safe-haven status, consequently resulting in the further downside.

In regards to the technical picture, the Dollar Index turned bearish on the daily charts after prices tumbled below the 94.00 support level. The classical head and shoulders formation on the daily charts suggest that bears are back in town with the 93.50 acting as the first level of interest.

While the argument for bulls to make a return could be based on the Fed raising interest rates next week, the hike has already been heavily priced in. The Dollar Index remains at a threat of sinking towards 93.00 if the central bank expresses concernS over trade tensions impacting growth.

Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Pound Boosted by Retail Sales, EU Summit in Focus

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The Pound was thrown back into the limelight today after UK retail sales unexpectedly rose in August.

UK retail sales dished out an upside surprise by rising 0.3% last month as shoppers shrugged off Brexit concerns over the summer period. While this encouraging report adds to a number of solid economic indicators produced by the UK, investors are likely to remain more concerned with Brexit developments.

Market optimism over Britain striking a Brexit deal with the European Union has been the primary driver behind the Pound’s appreciation in recent weeks. However, it is becoming evident that Sterling remains extremely sensitive and highly reactive to Brexit talks. The explosive price action witnessed yesterday following reports of Theresa May set to reject the European Union’s “improved” offer on the Irish border is a testament to this.

Investors will be keeping a close eye on today’s informal EU summit in Salzburg which will play a major role in where the Pound concludes this week. It is worth noting that the Irish border puzzle remains a fierce obstacle to a deal, and it will be interesting to see if both sides are able to overcome this issue.

Taking a look at the technical picture, the GBPUSD is firmly bullish on the daily charts with prices trading above 1.3200 as of writing. While Dollar weakness has played a role in the Pound’s upside, most of the gains remain attributed to Brexit optimism and positive UK economic data. A solid daily close above the 1.3200 level could inject bulls with enough inspiration to challenge 1.3280 and 1.3320, respectively.

Dollar bulls were nowhere to be seen on Thursday as easing trade war fears boosted risk sentiment – ultimately dampening the Greenback’s safe-haven appeal. A bout of profit taking ahead of the FOMC statement next week fueled the downside with the Dollar Index trading marginally below 94.30 as of writing. Sustained weakness under the 94.30 level could send prices towards 94.00 in the near term.

In the commodity markets, Gold prices struggled for direction despite easing trade tensions softening the Dollar. Price action suggests that the yellow metal is currently hunting for a fresh directional catalyst to make the next major move. In regards to the technical perspective, the $1,200 psychological level remains a significant point of interest with $1,213 acting as resistance and $1,190 a support.

Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Investors Ignored the Latest Round of Tariffs; For how long?

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Equity markets do not seem to be concerned over the latest phase of the U.S.-China trade war. Investors have been pricing negative news for months which has led several emerging markets into bear territory.  The 10% tariffs imposed by the U.S. on $200 billion worth of Chinese goods seemed to be a relief rather than a catastrophe given that markets were bracing for a 25% figure. Similarly, the Chinese response was a softer hit than anticipated after announcing that the nation won’t engage in currency devaluation.

There’s no doubt that China’s economy will take a bigger hit if tensions escalated further. After all, China had a trade surplus of $375 billion with the U.S. in 2017. If China’s exports decline- significantly, the economy’s growth may slow down to 6% by 2019. However, there are no signs that Chinese officials are willing to wave the white flag anytime soon, especially with the U.S. mid-term elections being less than two months away.

When looking at the performance of global stock markets this week, investors still seem to believe that a deal between the largest two economies will be struck instead of a further escalation of trade tensions. However, with President Trump in office, I have doubts that an agreement will be reached.

Although China cannot go toe-to-toe with the U.S. in a retaliatory tit-for-tat tariff war, they still have options to support their economy and hit back at the U.S. with non-tariffs weapons. China may simply put its deleveraging efforts on hold and begin a new round of fiscal and monetary stimulus to offset the damage created by trade. A reduction in corporate tax rates on manufacturing and other industries along with keeping interest rates low and a further cut in Reserve Requirement Ratio to support credit growth will keep the economy well supported for the foreseeable future.

A gradual depreciation in the Renminbi is another tool to offset tariff impacts. The CNY has dropped more than 5.2% against the dollar so far this year, so it requires less than 5% depreciation to offset the current 10% tariffs imposed by the U.S. Despite Premier Li Keqiang vow not to pursue a policy of currency devaluation, officials can blame market conditions on the fall of the currency.

Beijing still seems to be playing defensive so far, but if China decides to move on the offensive a new strategy will be followed. This may include boycotting U.S. products, increasing taxes on earnings of U.S. companies in China, refusing to grant approvals for M&A involving U.S. businesses, and reducing its U.S. debt holdings. Any signs of China following this path will be damaging for investors’ confidence and that’s what could lead to a steep selloff in global equities.

Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Yuan to Benefit from Premier Xi Comments, UK CPI in Focus

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Global markets are attempting to power higher today as investors mostly brush away the latest escalation in tit-for-tat tariffs between the world’s two largest economies. The Yuan is also benefiting after Premier Xi Jinping confirmed that Chinese authorities will not purposely devalue the Yuan in response to trade tensions.

The reassuring comments from the Chinese Premier will go a long way towards reassuring investor confidence in China. Not only will it help stabilize the Yuan, but it can also play a factor in helping currencies across the region when factoring in how important China has become to the global economy.

There is also a sense of some relief across investors that the United States could be softening its stance after it imposed 10% tariffs on an additional $200 billion worth of Chinese goods, instead of the expected 25%. This has provided some quiet optimism that both sides will attempt to return to the negotiation table later down the line to resolve the prolonged trade tensions.

With China unable to stand toe-to-toe with the United States in the tit-for-tat tariff battle, there were initial concerns over the nation devaluing its currency to make exports more competitive, despite indications from the PBoC weeks ago that this was not an option on the table. These concerns have once again been wiped away after Premier Li Keqiang this morning stated that “A one-way devaluation will do more harm than good to China’s economy”.

The Pound’s fortunes this week remain tied to the outcome of the European Union summit. A scenario where there is a fresh breakthrough on Brexit talks could significantly boost buying sentiment towards the British Pound. Away from Brexit, investors will keep a close eye on the pending UK inflation reading which is expected to show CPI cooling to 2.4% in August. Although an upside surprise could support the Pound and expectations of further monetary tightening, Brexit developments may force the Bank of England to stand still. If economic conditions continue to improve and wage growth respects a positive trajectory, the central bank could be poised to act with higher UK interest rates after Britain divorces the European Union in March 2019.

In the currency markets, the Euro edged slightly higher during early trade amid Dollar weakness. The EURUSD has traded within a wide range for the past few weeks with support at 1.1550 and resistance at 1.1800. With quantitative easing in Europe coming to an end this year and the ECB unlikely to raise interest rates until summer 2019, the Euro seems to be on autopilot. All eyes will be on Mario Draghi in Berlin this afternoon, as he discusses the future of economic policy in the Euro Zone. The EURUSD has scope to appreciate towards 1.1730 if Draghi expresses optimism over the health of the European economy.

Elsewhere, Oil prices were steady on Wednesday morning despite an unexpected climb in U.S. Crude stockpiles stimulating oversupply concerns. Oil markets could turn volatile and unpredictable as investors tussle with the conflicting fundamental themes. While geopolitical risk factors in the form of looming U.S. sanctions on Iran have pushed prices higher, rising global oil supply and trade tensions have somewhat limited upside gains. In regards to the technical picture, WTI Crude could appreciate towards $70.76 in the near term if bulls can secure a daily close above $70.00.

Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Trump Beats the Drums of Impending China Trade War Louder than Before

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The drums of a global trade war are beating louder than ever after U.S. President Donald Trump imposed a 10% tariff on an additional $200 billion worth of Chinese goods.

This move has certainly elevated U.S.-China trade tensions to dangerous heights, especially when considering how the U.S. has also threatened to raise tariffs up to 25% in 2019 if no trade deal with China is reached. With Beijing threatening to bite back, concerns over a full-blown trade war becoming a reality are increasing. Beijing might react to the latest moves from President Trump by canceling trade talks with Washington as the latest U.S. tariff move “brings new uncertainties” to the negotiations.

Financial markets offered a fairly muted response to the announcement as the tariffs were already heavily priced into markets. Investors are instead likely to remain guarded and adopt a “wait and see” approach ahead of China’s possible retaliation to the latest round of U.S. tariffs.

In the currency markets, Dollar bulls are interestingly nowhere to be found today despite simmering trade tensions weighing on investor confidence. Buying sentiment towards the Greenback could receive a boost if Beijing’s potential reaction increases trade war fears and promotes risk aversion from investors.

Although the fundamental drivers behind the Dollar’s appreciation remain firmly intact, technically the Dollar is starting to look bearish on the daily charts. The Dollar Index is coming under increasing pressure with prices wobbling above the 94.50 support level. A breakdown below this point could encourage a decline towards 94.10 and 93.90. For bulls to jump back into the game, prices need to secure a solid weekly close back above 95.50.

Sterling has the potential to appreciate sharply if the European Union adopts a flexible approach on Brexit at the European Union summit later this week. The GBPUSD remains firmly bullish on the daily charts with the weekly close above 1.3000 paving a path for further upside. An intraday breakout above 1.3170 could instill bulls with enough courage to challenge 1.3200 and 1.3260, respectively.

Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

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Chinese Yuan Shows Resilience, Despite Emerging Markets Pressured by Trade Concerns

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Conflicting indications over the status of trade talks between the United States and China has contributed towards a subdued opening of the week for financial markets.

Reports that President Donald Trump will most likely impose tariffs on $200 billion worth of Chinese goods have collided with other reports that Beijing was considering rejecting trade talks with Washington. This collectively resulted in a cautious start to the trading week for investors, where they prefer to remain on the side-lines and await clarity on this ongoing issue before deciding what step to take next with their portfolios.

The atmosphere of caution and confusion has been reflected across the emerging market space with equities tumbling 1% while most EM currencies depreciated against the Dollar.

The Indian Rupee was a clear casualty of the uncertain external environment as it depreciated roughly 0.90% against the Dollar. It has been a painful year thus for the Rupee which has tumbled 12% against the Dollar (YTD), making it one of the world’s worst performing currencies this year. A heavily depressed Rupee will have significant ramifications on the Indian economy, especially when considering how the nation is a major energy importer. With a depreciating Rupee potentially stoking inflationary pressures, the Reserve Bank of India could be forced to hike interest rates for the third time this year.

Elsewhere, the Turkish Lira tumbled roughly 1.96% against the Dollar as concerns resurfaced over President Recep Tayyip Erdogan’s grip on the economy. It seems the “feel good” effect from last week’s bold rate hike by Turkey’s central bank has worn off with traders refocusing on the political and economic developments within the Turkish economy. Investors will be keeping an eye out for the Turkish government’s new medium-term program (MTP) to be announced on Thursday which could provide insight into the direction of Turkish economic policy. The Lira could roar back to life if the (MTP) shows signs of the authorities embracing a tighter fiscal program to support growth.

In China, the Yuan fought back against the Dollar despite escalating trade tensions weighing on market sentiment. The Yuan’s resilience could be based on Dollar weakness, or that investors may be directing more of their energy to attacking currencies belonging to markets with high current account deficits. Looking at the technical picture, the USDCNY has the potential to challenge 6.8290 if bears are able to secure a daily close below 6.8500.

Gold sparkled in the background as escalating trade tensions supported the flight to safety. A softer Dollar stimulated appetite for the yellow metal further with prices punching above the psychological $1200 level. While Gold could appreciate further in the near term, gains remain threated by key fundamental themes. With the Greenback heavily supported by “safe-haven” demand and the Fed poised to raise interest rates this month, Gold is destined for further pain.

King Dollar tumbled into the trading week losing ground against a basket of major currencies despite global trade developments denting investor confidence. There is a possibility that the weakness observed could be on the back profit taking ahead of the possible announcement of additional tariffs on China. Technical traders will continue to closely observe how the Dollar Index behaves above the 94.50 support level. An intraday breakdown below this region could inspire a move towards 94.10.

Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Gold Edges Up, Dollar Softens while Pound Holds above $1.30

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It has been a fairly cautious start to a busy trading week with movements observed across currency and stock markets somewhat muted as investors remained on the side-line.

Reports that Donald Trump will most likely impose tariffs on $200 billion worth of Chinese goods simply dealt a sharp blow to hopes for negotiations between the world’s two largest economies. With this unfavorable development likely to fan fears over a full-blown trade war becoming reality, risk aversion is to intensify across the board.

Gold glittered slightly this afternoon as heightened US-China trade tensions accelerated the flight to safety. A softer Dollar supported the yellow metal’s upside with prices edging towards $1197.50 as of writing. While Gold has the potential to challenge $1200 and higher in the near term, upside gains remained key fundamental forces. With King Dollar becoming the “go-to currency” in times of uncertainty and the Fed expected to raise interest rates this month, Gold is poised to witness further losses. For as long as prices remain trapped below the $1,200 psychological level, bears could attack $1,180. Alternatively, a breakout above $1200 could inspire a move higher towards $1,214.

Interestingly, the Dollar has depreciated against a basket of major currencies today despite trade tensions weighing on market sentiment. The Dollar’s weakness could be based on investors profit-taking ahead of Trump’s expected announcement of new tariffs on China. With the possible tariffs likely to deteriorate US-China relations further and push trade tensions to new heights, the Dollar will be the biggest winner. Technical traders will continue to closely observe how the Dollar Index behaves above the 94.50 support level. An intraday breakdown below this region could inspire a move towards 94.10.

Sterling has entered the trading week on firm footing amid growing optimism over the UK and the EU reaching a Brexit deal. The Pound’s explosive price action in recent days continues to highlight how the currency remains sensitive to Brexit headlines. With the GBPUSD securing a weekly close above 1.3000 and trading around 1.3110 as of writing, the next level of interest will at 1.3170.

Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Rand to Remain Volatile this Week, Indian Rupee Declines Towards all-time Lows

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Optimism that the moves from both the Central Bank of the Republic of Turkey (CBRT) and Central Bank of Russia (CBR) to raise respective interest rates late last week should provide investors with inspiration to invest in emerging markets is wearing thin at the beginning of the week. A number of emerging market currencies across have dipped lower against the Greenback early today, as a number of different external uncertainties around the global economy contribute to investor reluctance towards purchasing emerging market currencies at their current levels.

Due to the unpredictable nature of the external uncertainties around matters like trade tensions, it is difficult to buy into the headline that we have approached a turning point for the emerging markets. External uncertainties remain intense and until there are consistent indications that these are being removed from the atmosphere, it is more likely than not that investors will prefer to adopt a guarded approach towards the currencies that belong to emerging market assets.

The Indian Rupee is a prime example of a currency that is repeatedly facing pressure from uncertain external headwinds. The Rupee is also the most notable headline mover at the beginning of the week, weakening over 1% at a time of writing to edge closer to its recent historic lows against the Dollar. The pressure on the Rupee has come in spite of authorities taking several measures to prevent the currency from further weakness, but the unpredictable nature of the various external headwinds that is weakening investor sentiment towards the emerging markets generally is preventing the Rupee from a period of recovery.

There is no disputing that one of the main contributors to the uncertain external environment is mixed messages when it comes to the status of trade talks between the United States and China. Conflicting reports remained a theme over the weekend when indications circulated that on one hand, President Trump has provided the green light for additional Chinese tariffs being met, with other reports that Beijing was considering rejecting the offer from Washington to resume trade talks.

This ultimately suggests to investors that we are no closer to an “exit” door when it comes to prolonged trade uncertainty. As such, it wouldn’t be a major surprise if investors remain “risk off” as trading for the week gets underway.

One emerging market currency that is in line for volatility throughout the upcoming week is the South African Rand. Not only will the Rand remain sensitive to the various external uncertainties that are providing headwinds to emerging market assets, but there is some quiet speculation that the monetary policy meeting later this week could result in a change of interest rate policy in South Africa.

The South African Reserve Bank (SARB) is truly situated in a very unenvious position. The Rand is a leading contender for being sensitive to external headwinds away from South Africa, but the news that the economy has entered its first recession since 2009 provides an indicator that the SARB should consider lowering interest rates. The problem is that if the SARB do lower interest rates later this week, that it will increase inflationary risks for South Africa.

The British Pound is another currency that will be exposed to volatility throughout the upcoming week. UK Prime Minister Theresa May is set for another round of key Brexit discussions throughout the week and the Pound has shown on various occasions in the past couple of weeks that it remains highly sensitive to Brexit headlines. If concerns mount that the United Kingdom is heading towards a hard Brexit, we shouldn’t be surprised if the GBPUSD once again falls below 1.30 this week.

Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Stocks Rise on Trade Optimism, Dollar Limps into Weekend

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Global equity markets look set to conclude the week on a positive note as renewed hopes for fresh US-China trade negotiations support risk appetite.

Market sentiment was also boosted by the Central Bank of the Republic of Turkey’s (CBRT) bold decision to hike interest rates which empowered the Lira and emerging markets. With US-China trade tensions easing and concerns revolving around emerging market risk receding, a risk-on mood could rollover into the new trading week.

Dollar bulls were missing in action today, and for the most part of the trading week, after a string of disappointing economic data weighed on expectations for a rate hike in December. A return in risk appetite accelerated the downside as investors reduced their safe-haven holdings of the Dollar. With easing US-China trade tensions fueling the risk-on sentiment, the Dollar has scope to depreciate further. Focusing on the technical perspective, the Dollar Index could tumble towards 93.90 if bears are able to secure a weekly close under 94.50.

It was a bullish trading week for the British Pound as positive Brexit headlines boosted buying sentiment towards the currency. Reports that Britain and the European Union have made progress on the Irish border issue boosted optimism over a Brexit deal being reached within 6-8 weeks. A broadly weaker Dollar offered the Pound an additional boost with prices trading marginally above 1.3100 as of writing. Bulls are likely to secure control if the GBPUSD is able to achieve a weekly close above the 1.3100 level.

Gold is poised to end the trading week on a high note mostly due to Dollar weakness. The fact that the precious metal has appreciated in a “risk-on” environment continues to highlight how the trajectory remains influenced by king Dollar. With Dollar weakness expected in the near term as trade tensions ease, Gold could witness further gains. Technical trades will continue to closely observe if bulls are able to secure a weekly close above the $1200 psychological level. Such an outcome may open a clear path towards $1214 in the short to medium term.

Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

 

Lira Soars after CBRT Rate Hike, Asia FX Attempts to Benefit

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The brave move from the Central Bank of the Republic of Turkey (CBRT) to raise interest rates much higher than market expectations just hours after President Recep Tayyip Erdogan once again made public comments against high interest rate policy appears to be supporting improved risk appetite at the end of the week.

A number of EM currencies in Europe initially gained following the central bank decision in Turkey including the South African Rand and Russian Ruble, and this really is attempting to filter through into Asia FX on Friday. The Malaysian Ringgit, Thai Baht, Indian Rupee and Korean Won are just a few of the different Asian currencies to be advancing higher against the US Dollar at time of writing on improved risk appetite.

Away from the decisive move from the Turkish central bank to increase interest rates in an effort to defend a currency that has been watched across the world for the past month, the prospects for further trade talks between the United States and China along with a softer Dollar on reduced trade tensions and weaker than expected US inflation data are all supporting risk appetite.

It is expected that the Lira will continue to take center stage when it comes to investor attention for the market environment at the end of the week. Investors are generally very relieved that the central bank was able to act in defiance to the outspoken tone towards interest rate policy from Erdogan just hours before the decision on Thursday, which concluded with the CBRT raising its key interest rate sharply from 17.25% to 24%. We did initially think it would require a move of 500 basis points to positively impact the Turkish Lira.

What will be interesting to watch from this point is whether the Turkish President makes any comment in regards to the move from the Central Bank. If the CBRT are able to regain market confidence that they remain independent from the Turkish Government, it can by all accounts support a group of different high-yielding currencies over the medium term. The South African Rand falls into this basket, while it will be interesting to monitor if it has a positive knock-on impact on either the Indonesian Rupiah or Indian Rupee. Both the latter currencies had fallen to 20-year lows (Rupiah) and repeated all-time lows (Rupee) since the Turkish Lira crisis attracted the attention of the globe last month.

While the move from the CBRT is to adopt a higher interest rate policy is encouraging for market confidence, this doesn’t eliminate the looming headwinds that are, or have already approached the Turkish economy.  Some skepticism might also remain that a one-time move from the CBRT is enough to convince investors that the central bank is independent of Government.

Market players will keep a close eye on how President Erdogan reacts to today’s interest rate hike. Any attempts on his side to influence monetary policy is a threat to investor sentiment.

The Bank of England (BoE) voted unanimously to keep interest rates unchanged at 0.75% as largely expected. There was a negative undertone from the BoE that policymaker’s saw “greater Brexit uncertainty since August” with rate hikes “gradual and limited” over the coming years. Expect for the Pound itself to remain highly sensitive to any Brexit reports over the upcoming weeks.

The European Central Bank kept policy unchanged and confirmed it would halve its monthly bond purchases to 15 billion euros from October. The ECB also downgraded its economic growth projections and issued concerns over protectionism and emerging market volatility but the Euro overall enjoyed a round of unwinding on USD positions to jump higher for the day.

The surprise decline in the US inflation report and weakening expectations for an interest rate increase from the Federal Reserve in December encouraged pain for the Greenback. If the end of week retail sales report from the United States also disappoints this should provide an opportunity for a wide range of global currencies to extend momentum against the USD.

The Dollar Index is at risk of sinking below 94 over the medium term if sellers are able to secure a weekly close below 94.50 today. This would, of course, be welcome news for emerging market currencies across the globe, especially the likes of the Indian Rupee and Indonesian Rupiah in Asia when you consider the duress these currencies have witnessed in recent weeks.

Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Lira Soars on CBRT Rate Hike, Pound Jumps

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The Lira roared back to life on Thursday after Turkey’s central bank caught investors off-guard by raising interest rates higher than market expectations.

In a move that was seen as defiance against President Recep Tayyip Erdoğan, the Central Bank of the Republic of Turkey (CBRT) raised its key interest rate sharply from 17.75% to 24%. While the Lira has scope to extend gains on the CBRT’s pledge to enact strong monetary tightening, bulls could face headwinds down the road.

A one-time defiance against Erdoğan may not be enough to fully convince markets that Turkey’s central bank is truly independent. Investors need to see “further monetary tightening” over a period of time for further reassurance. Market players will keep a close eye on how President Erdoğan reacts to today’s interest rate hike. Any attempts on his side to influence monetary policy is likely to weigh heavily on sentiment.

Turkey’s interest rate hike not only boosted the Lira but also supported other emerging market currencies. A softer US Dollar complimented the upside with the South African Rand gaining 1.2% while Russia’s Rouble rose 1%. Emerging market currencies could be offered some breathing room if trade tensions continue to ease and the Dollar weakens further.

Elsewhere, the Bank of England voted unanimously to keep interest rates unchanged at 0.75%. Policy makers saw “greater Brexit uncertainty since August” with rate hikes “gradual and limited” over the coming years. The Pound’s reaction towards the rate decision and BoE policy statement was fairly muted. However, the currency later jumped on reports that Britain and the European Union had made progress on the Irish border puzzle. It is becoming very clear that the Pound remains highly sensitive to Brexit developments and this continues to be reflected in the currency’s explosive price action. The technical picture suggests that bulls are back in town on the daily charts. A daily close above 1.3100 may pave a path towards 1.3160.

In Frankfurt, the European Central Bank kept policy unchanged and confirmed it would halve its monthly bond purchases to 15 billion euros from October. The central bank trimmed its growth forecast and raised concerns over protectionism and emerging market unrest. However, Mario Draghi expressed confidence over the health of the eurozone which boosted the Euro. The Euro rallied a two-week high following Draghi’s press conference with prices trading marginally above 1.1680 as of writing. A solid daily close above 1.1650 could inspire a move higher towards 1.1710.

It was a painful day for the US Dollar after a surprise fall in US inflation dented expectations for a rate hike in December. The renewed risk sentiment accelerated the Dollar’s downside with prices dipping below 94.50. Investors may be offered another opportunity to offload the Dollar if Friday’s US retail sales report prints below market forecasts. The Dollar Index remains at risk of sinking towards 93.90 if bears secure a weekly close below 94.50.

Oil prices tumbled sharply after reports from the International Energy Agency (IEA) showed global oil supply hitting a record high of 100 million barrels a day last month. The record world output could neutralize the negative impacts created from US sanctions against Iran’s oil exports. WTI Crude has scope to challenge $68.10 in the near term if prices can keep below $69.00.

Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Dollar falls on Trade Hopes, BoE, CBRT and ECB in Focus

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A collective sigh of relief across financial markets and investors has been noticed following the latest reports that the United States has proposed fresh trade talks with China. This shortly followed headlines that the United States and Canada were moving closer to an agreement on trade, which has encouraged the Dollar to dip lower against its counterparts.

Trade tensions have long been seen as the motivator behind a stronger Dollar, and the indications that the Trump administration are not as aggressively pushing for trade tensions as feared is seen as negative for the Greenback. The Chinese Yuan has edged higher on the news that Washington is engaging with Beijing to resume trade talks, with a range of other EM currencies in Asia benefiting from increased risk appetite.

While this is not the first time there has been optimism around negotiations between Washington and Beijing, which have later escalated to further trade tensions, investors will want to remain optimistic that an agreement over this long-standing issue will eventually be made. The talks are overall a positive step that both sides are willing to diffuse tensions between the two largest economies in the world.

Another driver that might be encouraging -softness in the Dollar is the disappointing PPI data weakening expectations over a potential U.S. interest rate increase in December. The major driver for the Dollar over the medium to  longer-term will however remain as trade tensions. Any future indications of optimism over trade would be seen as encouraging for renewing risk sentiment, and specifically prompting investors to reduce their safe-having holdings on the Dollar.

Away from the prolonged trade headlines, Central banks will take center stage today, with the Bank of England, European Central Bank and Turkish Central Bank under the spotlight.

Although the ECB is widely expected to leave monetary policy unchanged in September, markets are speculating a potential downgrade in growth forecasts amid global trade tensions. The potential downgrade might not be enough to derail the ECB from tapering QE, but it could weigh on the eventual goal of the ECB raising EU interest rates before the end of 2019. Market players will be paying very close attention towards the ECB president’s press conference this afternoon for further insight into rate hike timings and thoughts on the latest global trade developments.

In the United Kingdom, the Bank of England is poised to maintain status quo on interest rates as Brexit talks build momentum. Investors will closely scrutinize the policy statement for clues on when the central bank plans to raise interest rates again. Although the stronger-than-expected wage growth has illustrated an encouraging picture of the UK economy, this is unlikely to alter the BoE outlook for monetary policy. The Bank of England is far more likely to remain on standby until the cloud of uncertainty created by Brexit disperses. It might even note some concern that Brexit itself remains very uncertain despite there only being six months until the United Kingdom is supposedly going to be leaving the European Union.

The Turkish Central Bank is expected to raise interest rates today in an effort to resuscitate the battered Lira. A rate hike does appear to have been priced in by investors over recent weeks. There is a high risk however that even if the central bank does act today as expected, that investors could sell the news that interest rates are still not high enough to prevent the ongoing risks that the Turkish economy is set to face.

The toxic combination of political instability, skyrocketing inflation, a deepening current account deficit and questions over central bank independence will remain as stumbling blocks for the Lira. The Turkish Lira itself has been attacked from all directions this year and with key fundamental themes unlikely to go away, there are still risks ahead for the currency.

Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Sterling weakens despite wage growth surprise

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There was appetite for the British Pound on Tuesday morning following official data that showed UK wage growth accelerating faster than expected. However, gains were later surrendered as investors redirected their focus back toward Brexit developments.

UK wage growth surprised to the upside by rising 2.9% in the three months to July while the unemployment rate remained steady at 4% – its lowest level since March 1975. Although the jobs report illustrates an encouraging picture of the UK economy, this is unlikely to convince the Bank of England to raise interest rates anytime soon. The central bank is poised to remain on hold until the thick smog of uncertainty created by Brexit fully dissipates.

Sterling’s extreme sensitivity to Brexit headlines has clearly become a dominant market theme. The explosive price action witnessed yesterday following encouraging comments from the EU’s chief Brexit negotiator is a testament to this fact. While a renewed sense of optimism over a Brexit deal possibly secured within 6-8 weeks could push Sterling higher, any hiccups during the talks are likely to expose the currency to downside shocks.

Looking at the technical picture, the GBPUSD is turning bullish on the daily charts. Prices are trading above the daily 20 Simple Moving Average while the MACD is in the process of crossing to the upside. Bulls will remain in control as long as the GBPUSD is able to keep above the 1.3000 level. However, a breakdown below 1.3000 could inspire a decline back towards 1.2940.

Across the Atlantic, the Dollar rebounded against a basket of major currencies as rising global trade tensions boosted its safe-haven demand. The Dollar is likely to remain king across currency markets on the back of US rate hike expectations and the bullish sentiment towards the US economy. Taking a peek at the technical picture, the Dollar Index could challenge 95.80 once bulls are able to secure a solid daily close above 95.50.

Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Recovery in U.S. stocks fails to motivate Asian investors

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The positive momentum seen in European and U.S. stocks on Monday was unable to translate into broader gains in Asian equities. While Japan’s Nikkei was up more than 1% in afternoon trading, the South Korean Kospi index traded slightly lower, with Hong Kong’s Hang Seng flirting with bear market territory.

Despite a slight return in appetite for equities, the risks have not changed. Emerging markets are still vulnerable to further shocks, and the U.S.-China trade dispute is likely to escalate further in the coming days. This makes it difficult for investors to make up their minds on whether to begin purchasing oversold potential stocks or wait longer for clarity on how U.S.-China relations resolve.

Sterling was under the spotlight in currency markets. GBPUSD shot 100 pips higher after the EU’s chief Brexit negotiator Michel Barnier said a Brexit deal could be struck in six to eight weeks. With many short positions being accumulated over the past several weeks, traders should expect a further rally in the Pound if more progress is achieved. However, to see a meaningful rally, UK MPs need to come together, but so far deep divisions – persist.

The Australian dollar recovered slightly in late Asia trade after touching its lowest level since February 2016. While there was no significant economic data released, the AUD continued to behave as a barometer of trade risk. Traders who want to bet on AUD need to keep a close eye on trade developments.

Oil prices were slightly higher in early trade as Washington continued to put pressure on countries exporting oil from Iran. While South Korea was the first Iranian customer to cut its crude imports to zero, Japan and India are signaling to move in the same direction.  Whether Russia and Saudi Arabia will fill the expected gap remains to be seen until November. Geopolitical risks in the Middle East region will escalate if more pressure is put on Iran, and that’s likely to keep prices well supported in the short run.

Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Markets on high alert as Trump ramps up trade threats

Investors across the globe entered the trading week adopting a cautious approach after U.S. President Donald Trump doubled down his China tariff threats on Friday.

In a move that has eroded U.S.-China relations even further, Trump threatened tariffs on another $267 billion worth of Chinese goods. With the United States already poised to slap tariffs on $200 billion worth of Chinese goods and Beijing reiterating threats to fight back, the U.S.-China trade war could reach dangerous heights. The growing fears of an all-out tit-for-tat trade war between the world’s two largest economies are likely to fuel risk aversion, ultimately punishing global stocks and emerging markets.

Focusing on emerging markets, weakness is set to remain a recurring theme amid global trade tensions, a broadly stronger Dollar and prospects of higher U.S. interest rates. With turmoil in Turkey and Argentina triggering contagion fears, appetite for emerging market assets and currencies is likely to continue diminishing. In the EM currency space, the outlook remains tilted to the downside in the near term, especially for those currencies with high current account deficits.

In the commodity markets, Gold has -again struggled to find any support despite escalating U.S.-China trade tensions denting investor confidence and promoting risk aversion.

The bearish price action witnessed in recent weeks continues to highlight how Gold’s trajectory remains heavily influenced by the Dollar’s performance. With King Dollar spoiled by expectations of higher U.S. interest rates and safe-haven demand, this could mean nothing but pain and misery for zero-yielding Gold. It is worth noting that the Dollar has snatched away a fair chunk of Gold’s safe-haven allure with investors turning to the Dollar in times of uncertainty. Focusing on the technical picture, bears wrested back control after prices secured a weekly close below the $1,200 psychological level. Sustained weakness below this level could encourage a decline towards $1,180.

Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Lukman’s Week Ahead: Market themes to watch out for – Webinar September 17

Take an in-depth look at the latest developments in the global financial markets with FXTM’s Research Analyst, Lukman Otunuga. An authority on the markets, Lukman is frequently quoted by leading media across the globe, including the BBC, CNBC, CNN Money and Reuters.

Join Lukman for expert insights on the latest market movements, potential trading opportunities and what the week ahead has in store for traders.

Enjoy an expert look at:

• The key themes driving the financial markets
• Technical and fundamental trading ideas on the MT4 platform
• How to use the latest FXTM trading signals
• Using fundamental analysis to increase your profit potential
• What to monitor over the coming week

Risk of Contagion may no Longer be Ignored

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Investors had a tough week as the fall in emerging market currencies seemed to spread into other asset classes, not just in developing economies but also the developed world. Crashes in the Argentine Peso and Turkish Lira were first believed to be idiosyncratic risks that wouldn’t lead to any spillover., But now it looks like the concern over contagion risks are spreading to all asset classes. EM equities entered into a bear market, falling 20% from their January peak. The Indonesian Rupee, Indian Rupee, South African Rand, and several other EM currencies are either trading at record or multi-year lows.

Investors who have been on the sidelines may think of the selloff as a good opportunity to start accumulating some oversold EM assets. However, the prospects of more U.S. interest rate hikes, and continuing global trade tensions make it difficult to jump in.  Over the next two days focus will be on President Trump who is expected to announce another round of tariffs on $200 billion worth of Chinese goods. Going ahead with these tariffs suggest that a full-blown trade war has just kicked off and more pain will be felt across the globe. Yesterday’s big jump in the U.S. trade deficit indicates that Trump’s “America First” policies are not even close to achieving his targets, suggesting that further tariffs are almost inevitable.

In major currencies, Sterling had a rollercoaster day on Wednesday. After jumping 1.2% in less than 15 minutes against the dollar on a Bloomberg report that Germany and the U.K. have abandoned key Brexit demands, the currency pair moved sharply lower later in the day after German officials denied these reports. Expect to see more of such swings in GBPUSD in the coming weeks, as every comment related to Brexit negotiations has the power of moving the currency more than 100 pips in any direction.

While major currencies traded in narrow ranges early Thursday, cryptocurrencies seemed to be having a bad day. News that Goldman Sachs had rolled back plans for a cryptocurrencies trading desk led to a steep selloff in bitcoin and other cryptocurrencies which lost more than 10% in value in less than 24 hours. Goldman’s decision comes several weeks after the SEC rejected proposals for a bitcoin exchange-traded fund. Many traders will be focusing now on the $5,800 level for bitcoin, a price which had been tested five times but failed to break below. A break below will likely lead to a further selloff and potentially drag bitcoin below $5,000.

Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Global Trade Tensions Fuel “risk-off” Sentiment, EM Currencies Burn

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Risk aversion remains at the forefront of the current market sentiment. Prolonged trade tensions around the global economy and the new risk that investors are attacking those markets belonging to currencies with high account deficits is playing a leading role behind the dent in market sentiment.

A negative vibe continues to linger in the vicinity ahead of looming U.S. tariffs on $200 billion worth of Chinese goods, while uncertainty over NAFTA talks has left global sentiment extremely cautious. The lack of appetite for risk can be observed across stock markets today, with a wide number of Asian shares closing in a red territory and European stocks following a similar trend.

The popular topic among investors remains the brutal selloff across emerging market currencies. It has certainly been a terrible trading week thus far for most major EM currencies as investors begin to compare the ongoing pressure in EM currencies to the 1997 Asian financial crisis. Trade war tensions and broad-based Dollar strength continue to play an active role in the weak sentiment for emerging markets, but the indications that investors have used the past events in Turkey to attack markets belonging to those with high current account deficits should not be ignored. The Indonesian Rupiah fell to another 20-year low against the USD earlier today while the Indian Rupee has fallen to yet another record low. The South African Rand has also been blasted into weakness following news yesterday that the economy has entered a recession. The most recent moves in the Rand are beginning to catch up to pre-crisis moves in the Lira, with the economic challenges that South Africa faces being quite similar to those in Turkey.

Heavy declines in the Turkish Lira and Argentina Peso have overall spread like a virus to other economies in the developing world with the Indonesian Rupiah, Rand and Russian Ruble just a few of the many succumbing to the negative trading environment. With the financial turmoil in Turkey and Argentina eroding sentiment and trade disputes promoting risk aversion, the near-term outlook for EM currencies remains pointed to the downside.

In the United Kingdom, Sterling bulls failed to make an appearance despite activity in Britain’s service sector picking up momentum in August. Although UK Services PMI rose 54.3 in August, up from 53.5 July, the fairly bland reaction continues to highlight how investors may be redirecting their attention elsewhere – namely uncertainty over Brexit talks. Taking a look at the technical picture, the GBPUSD remains bearish on the daily charts as long as bears can maintain control below 1.2900.

Across the Atlantic, the US Dollar is likely to remain king of the hill in the currency markets as trade tensions stimulate safe-haven demand for the Greenback. For as long as the Dollar continues to benefit from risk aversion the outlook remains bullish. Regarding the technical perspective, the Dollar Index is firmly bullish on the daily charts. Prices could challenge 95.80 in the near term once a daily close above 95.50 is achieved.

Gold prices floated slightly higher today amid the risk-off sentiment, but gains are seen as being capped by King Dollar.

The yellow metal has failed on repeated occasions to find any solid support from global trade concerns and this continues to be displayed in price action. Technical traders will closely observe how prices behave above the $1,190 level.  An intraday breakdown below this level can open up the gates for a potential return to the 2018 low last seen nearly a month ago.

Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Pound Sags ahead of BoE Inflation Report Hearing, Gold Sinks

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The British Pound had a rocky start to the week after Brexit negotiator Michel Barnier warned that he “strongly” disagreed with key parts of the UK’s Brexit proposal.

Buying sentiment towards the currency deteriorated further on reports that the UK manufacturing sector expanded at the weakest pace in more than two years in August. With Brexit related uncertainty clearly haunting investor attraction towards the Pound and soft economic data rubbing salt to the wound, the outlook remains tilted to the downside.

Much attention will be directed towards the UK’s inflation Report hearings this afternoon where Carney and several of the MPC members are set to testify before the parliament. Investors will be closely scrutinizing any comments revolving around monetary policy, economic outlook and ongoing Brexit developments.  Matters could be worsened for the already battered Pound if Carney talks down rate hike prospects and suggests that last month’s rate hike was a “one and done” move.

The Pound not only remains pressured by Brexit uncertainty but external factors in the form of an appreciating Dollar. As of late, the Dollar has found ample support from safe-haven demand as prolonged US-China trade tensions stimulated risk aversion. Another key driver behind the Greenback’s appreciation is expectation over higher US interest rates this year. The combination of Pound’s weakness and Dollar strength has made the GBPUSD’s outlook bearish in the short to medium term.

Focusing on the technical perspective, the GBPUSD has secured a solid daily close below 1.2900 which may signal further downside in the near term. Prices are trading below the daily 20 Simple Moving Average while the MACD has also crossed to the downside. A breakdown below 1.2820 could encourage a move towards 1.2800 and 1.2730, respectively.

More Pain ahead for EM currencies?

Emerging market currencies have crashed into the new trading month following a painful selloff last week, driven by sharp declines in the Turkish Lira and Argentina peso. No prisoners were taken as the Indonesian Rupiah, South African Rand, Mexican Peso, and many other EM currencies felt the burn. The outlook for EM currencies remains gloomy, especially when considering how turmoil in Turkey and Argentina, global trade tensions, a stabilizing Dollar, and prospects of higher US interest rates all present downside risks ahead.

Commodity spotlight – Gold

Gold bears were back in action this morning thanks to an appreciating US Dollar. The outlook for the yellow metal remains tilted to the downside amid US rate hike expectations and a broadly stronger Dollar. The technical picture illustrates how significant the $1200 psychological level is on the daily charts. Sustained weakness below this level could open a path towards $1185. Alternatively, if $1200 proves a strong support level, prices could venture towards $1213.

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Disclaimer: This written/visual material is comprised of personal opinions and ideas. The content should not be construed as containing any type of investment advice and/or a solicitation for any transactions. It does not imply an obligation to purchase investment services, nor does it guarantee or predict future performance. FXTM, its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness of any information or data made available and assume no liability for any loss arising from any investment based on the same.

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