A market selloff is underway. The dollar is sliding against global currencies after the Federal Reserve decision to keep interest rates level. Today’s news features a slump in global oil prices, a jump for gold and silver, a rising New Zealand dollar, and an update on the Chinese real estate market.
The eurozone countries have an imbalanced approach to jumpstarting their economies, relying only on monetary policy but failing to address fiscal issues such as punitive taxation and over-bloated entitlement spending.
Canada is a major producer and exporter of natural resources, which means its currency is closely tied to the fortunes of commodity prices. With signs that the commodity super-cycle is fading, it is likely that CAD will notch up further losses over the course of 2014.
Amongst a number of weaknesses such as a huge current account deficit, the U.K. also has an inflation problem, which will eventually take its toll on the British pound. For the time being at least, a robust real estate market and recovering economy will be strongly supportive of Sterling.
Mark Carney placed jobless numbers center stage tying monetary policy to a 7% unemployment figure. With an economic recovery under way in the U.K., GBP's bias over the short- to medium-term is likely to be upwards.
Given the Fed's focus on jobs as governing the pace of QE measures, it was not surprising that a weak jobs number caused a sell-off in the dollar. However, signs the U.S. economy is doing better than many of its rivals suggests an end to the rally is not yet over.
Historically, the Hong Kong dollar has not been worth putting on a trader’s radar. The currency trades between a narrow band of 7.75 to 7.85 HKD per U.S. dollar and the Hong Kong Monetary Authority has maintained the peg since 1983.