The Dollar has resumed its rally after taking a pause, greatly due to the fact that Retail Sales were much better than what the market expected. As a result, December rate hike chances are now over 80% and is pretty much considered a done deal, unless a dramatic new event takes place until then. Fed member, Rosengren who said the market’s assessment of the likelihood of a December hike seems appropriate, also confirmed the above speculation. Today’s market focus will be on US Manufacturing production data and UK labor market report.
Currencies: The Dollar has regained its momentum, forcing the USDJPY to hit new highs at 109.60 supported by a rise in stock markets. The EURUSD hit a new 11-month low at 1.0698. Cautiousness is advised though, as the USD rally might lose steam now since the fact that rates will increase is almost fully priced in. The reason for the Dollar’s strength after the elections is the fact that Trump has promised tax cuts as well as pumping up spending, measures that will boost the economy and give rise to inflation. When inflation rises, Central Banks are forced to raise rates, which is positive for the value of the currency.
Stocks: Global equities had strengthened amid hopes that increased fiscal spending and tax cuts under Donald Trump’s administration will bolster economic growth and inflation. During European morning trade, France’s CAC 40 inched up 0.05%, while Germany’s DAX 30 fell 0.20%. US stocks closed with modest gains while markets in Asia were mixed, with Nikkei posting a new yearly high.
Oil and Gold: Gold dropped as low as $1218 yesterday, however has proved resilient and bounced to $1233 before trading at $1227 at time of writing. Gold is indirectly correlated with the USD so when USD gains in value, Spot gold tends to drop. $1230-$1235 is a resistance area and a breach of that level could spark further rise. In regards to oil, after a selloff that sent prices 20% lower from its 2016 peak at $52, prices rose to a 2 week high of $46.15 as market players awaited fresh weekly information on U.S. stockpiles of crude, while renewed optimism over an output cut by major global oil producers continued to boost sentiment.