The dollar limped toward it worst week in two months on Friday as softer-than-expected trade data from China added to signs that investors may be falling out of love with the post-U.S. election Trump trade.
So, Donald Trump finally spoke and down went stocks and the dollar. Shares of biotech stocks took a hit after the President-elect signalled that his U.S. government would negotiate aggressively on the price it pays for drugs. The U.S. dollar/Japanese yen currency pair, which tends to correlate positively with stocks, slumped.
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.
A short-lived surge in the euro dominated this year's last day of trade in major foreign exchange markets on Friday, with dealers citing a handful of orders as driving the dollar to its lowest since Dec. 8.
The dollar inched higher against the yen and a handful of other major currencies in holiday-thinned trade on Tuesday, with sterling by far the biggest faller as concerns over next year's Brexit negotiations continued to weigh heavily.
The Bank of Japan will release its Monetary policy statement and press conference between the end of Monday and the beginning of Tuesday Dec. 20. Analysts are expecting the central bank to keep the quantitative easing unchanged and negative rates on hold. The weak Japanese yen and hawkish U.S. growth expectations have given the BOJ room to hold and even improve its economy assessment.
Global equities, currencies and commodities took a hit after the Federal Reserve’s decision to raise interest rates on Wednesday for the second time in a decade. The 25-basis points increase was almost fully priced in and didn’t take market participants by surprise, but the strong reaction seen in the dollar and U.S. bond yields was due to the new projections for 2017, which showed the central bank now expects three rate hikes for 2017 rather than only two seen in September.