The rally in the USD continued yesterday as the Dollar Index hit 14 year highs backed by optimism that public spending and tax cuts promised by Donald Trump, will stimulate the economy. Odds for a December rate hike have neared almost 100% and at these levels, the possibility for a USD correction (retreat) are very high. The key focus now will be how the FED will act AFTER December and the political risk factors in the EU, starting with the Italian Referendum. Today’s focus will be Janet Yellen’s testimony where anything she might say will have an impact on the market. Also important are US Inflation data this afternoon.
Currencies: Backed by a very strong Dollar, the EUR posted yearly lows of 1.0665. With EU political risks looming in the horizon and the FED being cautious over higher inflation, the discussion over EURUSD reaching 1:1 has reemerged. GBPUSD is a non-mover in the past few days as it trades within a 100 pip range with no clear direction. On the other hand, the USDJPY rose as high as 109.74 (a 5-and-a-half-month high) before dropping to 108.54 overnight.
Stocks: Stock markets in Asian were weaker overnight, following a bad day for Stocks in General with the Euro Stoxx down 0.8%, FTSE 100 down 0.6%, the DAX down 0.7%, the S&P 500 off 0.4%, and the Dow Jones also down 0.4%.
Oil and Gold: Gold remains little changed at $1226, remarkably resilient to the USD strength. Normally it would have been expected for GOLD to be trading close to $1,200 based on the correlation with the USD, however $1220 proves to be a price of interest for buyers. Gold has still lost over $100 an ounce since the Elections last Wednesday. Oil prices eased as a bigger-than-expected U.S. crude inventory build outweighed hopes for a producers’ freeze on output following Russia’s comments about a possible meeting with Saudi Arabia