Three more rate hikes in 2017

16 December, 2016

FED decision
The Dollar reached its 14 year peak against its rivals on Thursday after the FED supplied markets with hawkish cues about the rate hikes in 2017, reviving Dollar rally and shaking the emerging markets.

The policymakers raised lending rate by a quarter and signalled for three more hikes in next year due to Trump promises to spur the economic growth by tax cuts, increased spending and deregulation. It was quite an expected decision for the financial markets, however another three rate hikes instead of the projected two have caught traders by surprise. 

The dollar index extended its rally by 0.63% percent to 102.67 at the time of writing, beating the peak of year 2003. The biggest declines among majors were seen with the Japanese Yen, Swiss Franc and Euro. Surprisingly, the Pound was more resilient to the relentless Dollar rally.


The US currency soared to a 12-month high against the Yen reaching 118.40 level as the low-yield Japanese currency was out of favour with investors, as well as, other safe heavens such as Swiss Franc and Gold. Swiss currency plunged 0.66% while bullion posted a steep drop by 2.75%.

Rising appeal of the US government bonds due to higher profitability puts more pressure on the emerging Asian currencies. The Chinese Yuan fell to the lowest level in the past eight years after the country’s Central Bank set the median exchange rate of the Yuan to the same level as Dollar, at its lowest level since mid-2008. Low-yielding currencies such as the Singapore dollar and South Korean won, but still felt the pressure as the investors are concerns of the capital outflow risks from the region’s economies of the region, where Dollar nominated assets.

After the FED decision, the yield on 10-year Treasury bonds jumped by 2.587 percent, the highest since September 2014, while the stocks of Wall Street showed the largest decline in two months.

The Australian Dollar fell 0.32% extending the 1.2% drop from the previous day, New Zealand dollar touched the minimum of 10 days at $ 0.7070.  At the same time, the Australian currency touched a peak of 11 months against the Yen, rising to 87.27 Yen while kiwi struck its peak of 18 months at 83.56 yen.

Source link  
Dollar strengthens on Fed talk

The dollar retreated from four-and-a-half month lows after the speech of Fed’s chair Janet Yellen, who noticed a stable economic recovery...

Is it the end of the US stock rally?

The demand for safe haven assets is declining, as the US stock market that was doomed to collapse remained stable. Investors are ready to jump...

Was populism defeated in Netherlands?

The Dutch voters resolutely put a brake on the populism wheel spinning across the globe such as the right-centrist party of Rutte, as election results showed his primary opponent Geert Wilder went up by a sizable margin...

US oil vs. OPEC - who will win?

US crude oil stockpiles soared for the ninth week in a row according to the EIA report...

Is Euro gaining momentum?

As for the Euro, we have pulled away from a strong level of 1.0522 forming a bearish trap...

Investors sail to safe harbours

The Dollar index flattened as Trump gave a speech ahead of the Congress meeting. The president left the market without any clues on the taxation issue saying it is postponed till the cancellation of Obamacare, which has been the biggest reform in healthcare...

Where is black gold heading?

The Euro is slowly going down and this is not brought on by the Eurozone situation. Instead, this is fueled by the U.S. Dollar. Yesterday, Janet Yellen gave a speech...

Is the European Union viable and needed?

The US dollar has erased the advantage gained earlier this week against its major opponents, as uncertainty hovers over the outcome of the tet-a-tet between Trump and Shinzo Abe...

The best investments for hedging political risks

Gold approached the broken level of 1241.40 + 50% Fibonacci level. Now, the price slowed down right next to our resistance area, therefore...