Whether you consider 2016 a good or a bad year, it was by no doubt the year of surprises. Not just because Donald Trump was elected the 45th president of the United Stated or because the UK decided to leave the EU, but the markets’ reactions to these events were even more surprising and most forecasters got it wrong.
The dollar edged down from a 14-year high against a basket of currencies on Wednesday, with investors cautious about increasing bets on the greenback before getting fresh clues on the U.S. economy and the timing of interest rate rises.
Gold's stronger showing so far has been in response to several things, including a “risk off” trade that was triggered Tuesday afternoon, but mainly due a weaker dollar. Indeed, something rather odd happened across the financial markets on Tuesday afternoon. Up until 15:00 GMT it had appeared as if it was “risk on” at the start of the New Year: the UK’s FTSE 100 had broken to a new record high, crude oil prices had surged to multi-year highs and the euro/U.S. dollar (EUR/USD) currency pair had dropped to a new 14-year low.
The rate banks charge each other to borrow dollars for three months rose above 1 % on Wednesday for the first time since May 2009 as global interest rates extend their climb on expectations of accelerating growth and inflation.
The dollar notched up its biggest gain in three weeks, oil jumped to a 18-month high and a record FTSE lifted European stocks to a one-year peak on Tuesday, building on upbeat Chinese data to ensure a strong start to 2017 for global markets.
Crude oil prices are springing up into the New Year as signs that OPEC will comply with production cuts is giving the market a boost. This rise comes despite a dollar index that once again is challenging 13-year highs. We had another re-opening massacre for natural gas on a questionable change in the weather forecast that is raising suspicions that the weather models in some cases may be flawed. And drivers at the pump are paying their highest start to a year for gas price since 2014.