As stocks hovered just below record highs on Wednesday, Boris Schlossberg, BK Asset Management’s managing director of foreign exchange strategy, breaks down three market themes he is watching for on Thursday in a trading session full of key political events that could rattle the markets.
1. Comey testifies
Former Federal Bureau of Investigation Director James Comey is set to testify Thursday before the Senate
Schlossberg will be watching the testimony closely.
“This could present a tremendous political risk to the market if he does release indeed some kind of a bombshell about the Trump presidency,” he said Wednesday on CNBC’s “Trading Nation.”
On the other hand, if nothing “controversial” comes
Comey’s prepared remarks were released Wednesday.
2. The European Central Bank meets
The European Central Bank is scheduled to meet Thursday and discuss monetary policy. Schlossberg is watching the euro’s movement, specifically, after any policy
“The euro has been on a tear lately. Partly because Emmanuel Macron won in France, but also because the market is speculating that the European Central Bank is going to taper the quantitative easing that’s been in place for several years,” Schlossberg said.
While it is not expected that interest rate policy will change, Schlossberg said, the market will be closely watching for any indication from ECB President Mario Draghi that indeed a “taper” is imminent; if that’s the case, the euro has the potential to rise against the U.S. dollar to the 1.15 mark.
The currency dipped in and out of negative territory in Wednesday trading.
3. A key level for gold
Gold has flirted with the $1,300-per-ounce level this week as political tensions mount and the U.S. dollar weakens. Though gold fell in Wednesday trading, Schlossberg is watching for gold to perhaps reach that region once again on Thursday.
“On Thursday we have a tremendous amount of political risk in the market. If that indeed translates into a big breakout for gold above the $1,300-an-ounce level, it could mean potentially a long-term rally in the yellow metal,” Schlossberg said.
Gold settled lower Wednesday at $1,289.50 per ounce.