Finally, after sailing in the rough sea of 2016 trades, we can sigh in relief, as the land comes into view. Plucky voyagers have been weathering through the raging waves of Brexit, US Elections, accommodation between the oil producers and intricate Central Bank policies. As the traders, have gotten through the main caprices of the financial markets, its time to relax and ponder over the year that is set to be before us.
The main concern for traders lies with the independent UK, and if it will save the European Union. Applying tough trade and immigration policies the fresh British government risks to lose access to the EU single market, a crucial channel of exports for the local British firms. Seeking for a compromise between two states is a key process to have correct take on the UK equities and the Pounds performance.
Federal Reserve vs. Trump
The euphoria over Trump sent the US Dollar and the equities to a new record high, as the President-elect pledged to increase the fiscal spending and to relieve corporate taxation, which bodes well for the US inflation and economic growth overall. However, a certain degree of vagueness hovers over the implementation of Trump’s economic initiatives, as they should be interpreted by the FED to make the monetary policy walk arm-in-arm with the US economy performance. The evident December hike came with a surprise of three more hikes planned next year, although, we all know how the FED masterly “downgraded” from three rate hikes in 2016 (forecasted on December 2015 meeting) to only one increase in the end of the year with a minimal jolt on the markets.
Banking crisis in EU and ECB
The last ECB meeting showed that the Central Bank is not in a hurry to halt the stimulus program. The signs of a banking crisis in Europe with Deutsche Bank and Monte Dei Paschi issues add to the evidence that it’s not likely to see ECB turning hawkish in the medium term. With ECB and FED acting more and more separate, Euro is likely to receive additional bearish attention and the European equities flourish under more stimulus.
Undoubtedly the prices shifted into a phase of growth with the Saudi Arabia, Iran and Russia putting end to the market repartition. Although it is essential to keep track of the actual output cuts, as history knows the examples, when Oil producers failed to honour their agreement. Trading will become especially tricky with actual market rebalance lagging behind the optimism over the rhetorics of oil officials and news about production cuts.Publication source