Thursday 7 november: A return of interest rate differentials?

It's a very nice sight to see the VIX remaining below 16, stocks rising and the overall positive risk environment. USD CHN has reversed, which has bouyed the AUD and NZD. And I'm 'hopeful' the currencies will once again start behaving according to interest rate speculation. Which will see a return of short CHF, JPY or CAD trades.

The BOE have cut rates in what I would deem a 'hawkish cut' and the GBP may remain supported. The upcoming FOMC meeting could go a long way to determine whether the USD remains on the long list or flip to a potential short.

As it stands, I'm still without a trade this week. Despite the potential opportunities of a USD long in the immediate aftermath of the Trump confirmation. Or, during the early hours of Thursday's European session, once USD CHN reversed and the risk environment was positive, a AUD or NZD long Vs CHF or JPY looked very inviting. But I was reluctant to take a trade ahead of the BOE meeting.

And now, my current decision is once again to wait, this time for the FOMC meeting. If chair Powell can appease the market. I'm hopeful of a return of those interest rate differential trades, especially if China can finally provide some positivity with an announcement on Friday.

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