U-Turn on the market?

29 November, 2016

On Monday, the Dollar posted the biggest declines since the outcome of the US elections. The dollar index, which tracks the performance of the US currency against major opponents, lost 70 cents crashing from 101.50 to 100.80 short-term support level. The currency recoiled, but the downside pressure remains due to several reasons:

OPEC’s wait for an agreement to cut the output
Peaked out optimism over the US economic growth prospects
Payrolls and Consumer Confidence report, which keep the uncertainty of the market.

Both economic reports may put a dent in the timeframe of rate hikes in the next year, as the market sentiments are extremely sensitive to the changes in the US economy. Trading on the 14-year peaks is a serious challenge for the currency especially when a big part of the rally is only backed by the wave of general optimism.

Commodity market

On the commodity market, Gold is trying to regain footing, adding 1% while other precious metals also surged in price. Oil traders change their bullish mood from last week on the hopes of a positive decision from OPEC on the distributed output. The price of Zinc has jumped up to a peak of more than nine years during the trading in London on Monday. Lead rose to a maximum of five years due to the expected increase in demand for manufacturing and construction metals. Since the beginning of 2016 non-ferrous metals rose in price by almost 30% after three years of constant declines. Prices of Zinc gained more than 80%. The rally was propelled by the news of the Chinese economy levelling off and the promises of the US President Donald Trump.

Equities

The commodity market optimism fails to spread on the equities, which are trading in a red territory today. The majority of European and UK indices posted negative gains, except Spanish IBEX 35 showing minor profits. The Emerging markets are trading mixed, as the impact from the Dollar is getting gradually sidelined.  The Brazil and Indian stocks rise, while Russian equities fall.

Majors

The European currency advances ahead of the Draghi speech, while Pound resumes declines as the currency can’t get rid of the negative pressure from numerous Brexit concerns and the easing expectations of BoE. The Japanese Yen surged by 0.85% with the Swiss Franc, which also rose by 0.35% against the US Dollar as investors turned their focus to safe heavens. The Australian Dollar rose was fuelled by the gains of the commodity markets.


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