iFOREX Daily Analysis : December 21, 2016
iFOREX | Dec 21, 2016 01:30AM ET
The dollar hit a fresh 14-year high on Tuesday, boosted by upbeat comments from Federal Reserve Chair Janet Yellen that kept alive market expectations for swifter U.S. interest rate hikes next year than had been expected. The greenback climbed broadly but its gains were strongest against the yen, which slid as much as 1 percent after the Bank of Japan kept monetary policy unchanged. On Monday the yen had surged along with fellow safe-haven the Swiss franc after deadly incidents in Turkey and Germany. Yellen said late on Monday that the U.S. labor market had improved to its strongest in almost a decade, suggesting wage growth is picking up. Expectations that U.S. President-elect Donald Trump's administration will go ahead with tax cuts and fiscal spending, leading to higher U.S. growth and inflation, have lifted U.S. bond yields and the dollar in the past six weeks. The British pound fell to one-month low of $1.2313 on Monday, pressured by renewed uncertainty over the process by which Britain will leave the European Union. Looking ahead, traders are casting an eye on Italy's troubled bank Monte dei Paschi di Siena which needs to raise 5 billion euros ($5.2 billion) by the end of the year to avoid being wound up by the European Central Bank. Today, the U.K. is to publish data on public sector borrowing and the U.S. is to release data on existing home sales. The main focus is shifted on tomorrow’s data from the U.S. on third quarter economic growth, initial jobless claims, durable goods orders and personal spending.
EUR/USD
The dollar hit a fresh 14-year high on Tuesday, boosted by upbeat comments from Federal Reserve Chair Janet Yellen that kept alive market expectations for swifter U.S. interest rate hikes next year than had been expected. The greenback climbed broadly but its gains were strongest against the yen, which slid as much as 1 percent after the Bank of Japan kept monetary policy unchanged. On Monday the yen had surged along with fellow safe-haven the Swiss franc after deadly incidents in Turkey and Germany. Yellen said late on Monday that the U.S. labor market had improved to its strongest in almost a decade, suggesting wage growth is picking up. Expectations that U.S. President-elect Donald Trump's administration will go ahead with tax cuts and fiscal spending, leading to higher U.S. growth and inflation, have lifted U.S. bond yields and the dollar in the past six weeks. The British pound fell to one-month low of $1.2313 on Monday, pressured by renewed uncertainty over the process by which Britain will leave the European Union. Looking ahead, traders are casting an eye on Italy's troubled bank Monte dei Paschi di Siena which needs to raise 5 billion euros ($5.2 billion) by the end of the year to avoid being wound up by the European Central Bank. Today, the U.K. is to publish data on public sector borrowing and the U.S. is to release data on existing home sales. The main focus is shifted on tomorrow’s data from the U.S. on third quarter economic growth, initial jobless claims, durable goods orders and personal spending.
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Gold
Gold prices settled lower Tuesday at $1132.60 per ounce, after six weeks of declines, despite recent geopolitical turmoil and mainly due to the recent strength in the dollar and the fact that the Federal Reserve signaled it expects to raise rates more quickly than previously anticipated in 2017. In addition, rising U.S. bond yields and a rally in stocks markets have also shifted investors attention away from the yellow metal. For this week market participants will be focusing on U.S. housing data, third quarter economic growth, initial jobless claims, durable goods orders and personal spending.
WTI Oil
Oil prices pushed higher on Tuesday, rising back towards the strongest level in more than a year-and-a-half after the American Petroleum Institute said late Tuesday that crude inventories in the U.S. fell by 4.15 million barrels at the end of last week, more than the expected 2.4 million barrels decline and marking the fourth draw in the last five weeks. Gasoline inventories fell 2.0 million barrels following a build of 3.9 million barrels the previous week and distillates fell 1.55 million barrels. The storage hub at Cushing, Oklahoma, recorded a build for the fourth successive week with an increase of 690,000 barrels. Prices are receiving some pressure skepticism that the planned cuts of OPEC will not be as substantial as the market currently expects. There are also some worries in the market about production increases in the U.S., where rigs drilling for oil rose to a level not seen in almost a year. For today, markets will be focusing on the EIA inventory report.
Germany 30
European stocks were mixed on Wednesday, as investors were still cautious following Monday’s two terrorist attacks and as trading volumes began to lighten ahead of the Christmas holiday. During European morning trade, the EURO STOXX 50 dipped 0.03%, France’s CAC 40 inched 0.07% lower, while Germany’s DAX 30 eased up 0.09%. Market sentiment soured after Russian ambassador to Turkey, Andrei Karlov, was shot and killed at an art gallery in the Turkish capital of Ankara Monday evening. A few hours later, a truck plowed into a crowded Christmas market in central Berlin, killing 12 people and injuring up to 50 others. Financial stocks were broadly higher, as French lenders BNP Paribas (PA:BNPP) and Societe Generale (PA:SOGN) rose 0.21% and 0.24%, while Germany’s Commerzbank (DE:DE:CBKG) and Deutsche Bank (DE:DBKGn) gained 0.55% and 0.86%. Volkswagen (DE:VOWG_p) saw shares rally 1.01% after the German carmaker confirmed that it will spend an additional $1 billion to settle claims in the U.S. over the emissions test scandal. For this week, equity traders will be focusing on GDP data from the U.S> on Thursday for further indications on the strength of the dollar.
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