The Greenback has been a star performer since Donald Trump’s market shaking presidential victory in November with the currency on track to finish the year near 14-year highs as a king amongst the major currencies. Sentiment remains firmly bullish toward the U.S. dollar with the cocktail of positive U.S. domestic data, hawkish Fed comments and heightened expectations of an improvement in U.S economic growth magnetizing investors to the currency.
WTI Crude edged above $54 per barrel on Wednesday as investors prepared for the OPEC and non-OPEC production cut deal, which is set to come into effect from January the 1st 2017. The prospect of major oil producers trimming output by almost 1.8 million barrels a day has been the engine behind oil’s resurgence in the final quarter of 2016.
Financial markets were exhausted on Thursday with most stocks drifting lower as investors offloaded positions ahead of the Christmas break. Asian shares have already retreated during early trading on Friday with European markets expected to remain subdued as the holiday season liquidity sinks in.
Sterling was under renewed pressure against the Dollar during late trading on Wednesday as sellers exploited the hawkish FOMC meeting to send the GBP/USD to fresh two-week lows at 1.2507. The ongoing Brexit uncertainty this quarter has made it increasingly difficult for sterling to maintain gains while dollar’s explosive rebound from the rising prospects of further U.S. rate hikes in 2017 could expose the GBP/USD to steeper losses.
The Euro/Dollar was exposed to extreme levels of volatility during trading on Thursday following the European Central Bank’s market shaking decision to taper its monetary stimulus to the Eurozone from April 2017 until the end of December 2017 or beyond.
The Greenback edged higher against a basket of currencies on Tuesday with prices stabilising above 100.00 as investors adopted a defensive stance ahead of next week’s FOMC meeting. With the CME Fed watch tool displaying a healthy 94.9% probability of an interest rate increase this month, much attention may be directed towards the intensity of rate hikes in 2017.