Equities On A Solid Footing As Markets Reopen

 | Jan 03, 2017 08:15AM ET

Forex News and Events

Equities higher as financial markets reopen

Financial markets are slowly waking up and starting 2017 on a firm footing as traders returned to their desks. Asian equities opened in positive territory this morning with the Shanghai Composite and Shenzhen Composite rising 1.04% and 0.86% respectively. Hong Kong’s Hang Seng was up 0.61%, while in Australia the ASX rose 1.19%. We will have to wait until tomorrow to see Japanese markets reopening. Equity markets across the continent are also climbing higher amid the positive lead from Asia.

In the FX market, the US dollar recovered partially from New Year Eve’s sell-off as the dollar index moved above the 103 threshold in the early European session. We remain cautious on further dollar strength as we jump into 2017 as most of last month’s rally was fuelled by Trump’s strong growth rhetoric.

Equities are up, the dollar is up and… gold is up, which suggests that investors are sleeping as well. Indeed, in spite of rallying 3.8% during the first half of December, the dollar index lost almost half of those gains during the final days of the year. During the same period, the yellow metal surged 3% to $1,150 an ounce. Even though it remains unlikely that gold will continue to rally in the short-term, investors always run to gold when uncertainty is rising, especially when equity gain rallies have been exclusively fuelled by bullish speculation, while fundamentals remained hesitant.

Reloading pound position may become trade of the year

According to The Times, UK Prime Minister Theresa May should trigger Article 50 in March and will likely be on the agenda of the next European Summit that will be held in March. This information has not yet been confirmed, however this morning the GBP/USD is below 1.2300.

The British government continues to await the Supreme Court’s decision on whether or not the Parliament must vote on the triggering of the Article 50. In our view, a parliamentary vote will certainly go against the referendum vote. Such a decision would nonetheless be in favour of European nationalists as their popularity increases as much as people become bypassed by institutions.

We are dubious of the information supplied by The Times until it is officially announced. Financial markets, are not disturbed and are still anticipating a Brexit, which is why we believe that the trade of the year may be reloading the pound position.

Crude Oil - Consolidating Below Resistance