The Value of the USD keeps appreciating with the Dollar now reaching at 9 month highs. The reason for the appreciations seems to be the perception that inflation will rise higher than expected in the US, greatly due to Trump’s policies in regards to fiscal spending commitment (building up infrastructure, hospitals, schools etc.) as well as lowering of taxes. In such case, monetary policy (the level of interest rates) needs to accommodate higher inflation rates, which means that the FED will have less concerns about lifting rates too early. The above is especially possible since Republicans now control Congress. Dollar index is trading at 99.40 at the time of writing and is heading to key resistance zone at 100.39/51. Some of the highlights in the week ahead are:
- Tuesday: RBA minutes, UK SPI and PPI, EU GDP, US retail Sales
- Wednesday: US Inflation data, US Industrial Production
- Thursday: UK retail Sales, US CPI, US Jobless claims
Currencies: The USD rally is still going strong, with majors and emerging markets currencies suffering against it. USDJPY hit 107.64 a 5-month high, while the EURUSD touched its lowest since January at 1.0771. Elsewhere, the NZD fell after a strong earthquake shook the country. The next big focus will be a political one with Italian referendum taking place on the 4th of December.
Stocks: The Dow Jones was the biggest gainer of all stock indices last week, having gained 5.4%. It also posted its best performance since 2011, while the SP500 was at its strongest in 2 years having gained 3.8% last week. Today, Asian shares are mixed with investors following the positive trend in Wall Street but also selling off due to the earthquake in New Zealand. Today, German DAX opened at 10760, up 0.57%. The technical Resistance of 10800 is extremely important.
Oil and Gold: Gold has been in a consolidation mode since last week. The yellow metal dropped to a 5-month low as $1212 this morning before bouncing to $1225 at time of writing. Gold prices were also pressured lower by the stronger U.S. dollar and ongoing expectations for a Federal Reserve interest rate increase in December. Oil prices fell in Asian as Chinese data showed some weakness in the world’s second largest economy. Prices are hovering near multi month lows of $43 a barrel, a significant support level that if broken, could open the way to $40.