The Dollar reached new highs yesterday with the USD index touching a new 14-year high at 103.65 before consolidating towards the later afternoon in Europe. The rally in the Dollar has reached 5.8% since the day Trump was elected President and yet, there are no signs that this is due for a reversal. In the euro area, consumer confidence is due to be released today while market participants will also be focusing on weak signs from China. There are some rumors that equity markets have completely ignored this risk factor from the world’s largest exporting country, which could bring a correction for stocks and currencies whose direction have been once sided so far. If stress continues, markets will quickly recall what happened in January last year shortly after the Fed hiked, and outflows could pick up further. Slowing growth, increasing financial imbalances and rising tensions with the US strengthen the risk.
Currencies: The Dollar consolidated last night, taking a breather from reaching new highs every day. Before that though, the Dollar was able to push GBP to a 1-month low of 1.2313 as Sterling was also pressured by renewed uncertainty over the process by which Britain will leave the EU. EURUSD also posted new 14 year lows, touching 1.0352 before rebounding to 1.04 at time of writing. The dollar was at 117.67 yen, coming within reach of its 10 1/2-month high of 118.66 touched on Dec 15.
Stocks: The Dow rose 0.46% on Tuesday, while the S&P 500 gained 0.36% and the Nasdaq 0.49%. In Asia, Japans Nikkei posted new yearly highs while China was again down as worries by Beijing’s talk that it may tighten liquidity to stop an outflow of capital, continue to grow.
Oil and Gold: US WTI was up 30 cents to $53.55 while BRT rose to $55.61 as expectations data later in the day will show that US Inventories decreased, reinforcing views that the global oil market is tightening. Gold was under pressure for most of the day as the yellow metal reached $1125.60 lows, from $1139 earlier. As the dollar lost its momentum though, Gold managed to rebound to $1136. The precious metal faces a further downward pressure as it yields no interest in a world of likely rising interest rates.