After Janet Yellen’s confirmation that December rate hike is imminent, the dollar has found support and is already soaring above its counterparts against all odds in technical resistance levels. As of today, Hang Seng is only short of 0.05% to step out of the red, while Shanghai index is down by 0.28% and Australia’s A SX 200 is up 0.39%. Among the market bulls, the dollar (USD) has claimed the lead again today after Asian session traders made the most of the markets yesterday. The dollar has recorded gain today, EUR/USD has dropped by yet another 23 pips (-0.22%) at 1.0603, while USD/CHF has risen by 16 pips (+0.16) to 1.0087 s GBP/USD records a drop of 12 pips (0.10%) to 1.2403.
The Yen has been on the losing side over the last few hours today, as USD/JPY exceed the 110.00 mark, having risen (+0.59%). At the same time, GBP/JPY earned 69 pips (+0.51%) standing at 137.12 and EUR/JPY soared by 44 pips (0.38%) to 117.23 as AUD/JPY rose by 30 pips (+0.37%) to 81.76. Meanwhile, oil related currency has suffered major losses to its counterparts as oil prices dropped. USD/CAD rose by well 48 pips (+0.36%) to 1.3545 as EUR/CAD inched up by 20 pips (+0.14%) to hit 1.4363 as GBP/CAD recorded a rise of 45 pips (+0.27%) to 1.6801. The major oil price drops on both sides of the Atlantic where Brent oil has sunk by 0.71% at $46.16 while elsewhere; U. S crude oil prices suffered the same fate, dropping by 1.03% to 44.95. This drop in oil prices comes on the approach of the official OPEC meeting. Besides, this is strange as the dollar is gaining strength, taking into consideration the fact that oil prices are tied with the dollar.
Pressure is building day by day on the U.S Dollar, running high on a relentless eight-day rise, while at the same time tension on the entry of the president-elect Trump’s impact on Fed continues to heat up. The possibility of Fed’s rate to hit the speculated 94% rate by December 14 is becoming skeptical. With a near future US session approaching, event risk that poses a threat of a hike of the final percentage looms in the horizon. The market’s inflation measure, Consumer Price Index (CPI) is already showing a worrying increase in the trend, which is apparently exceeding threshold.
After trump’s win of the US elections, changes in the economical aspect of the U.S are obvious, considering that the new president is very critical to Fed chair, Janet Yellen. Yellen has warned over hike in rates this December, while testifying before the Joint Economic Committee yesterday, which was her first since the U.S presidential election. It is now clear that things are not going well as I’ve been closely monitoring the dollar over at CMC Markets, especially considering that Trump has been opposed to Yellen’s move to keep interest rates low, saying that she is creating a false economy. Economists are expressing fear that t this will be influenced by seamless impact from Trump’s big spending.
Elsewhere, United Kingdom’s economy is also headed for the rocks. The UK government is facing a “GBP 100 bln black hole” in its finances, and MP Stephen Hammond is allegedly trying to hold onto a few of the former commitments to cut taxes as outlined in the Conservative’s manifesto in 2015. It’s not as if borrowing will help the situation, as this will likely spell doom for the expected surplus in 2019-2020 and lead to even further deficit.
UK is now set to resume its former purpose concerning tax changes, where the treasury had prompted speculation over adopting a looser fiscal policy over the summer. This is aimed at covering tax and spending. The UK government is having a hard time in taming its financial situation back to normalcy.
Over the East, Asia shares are on the rise, thanks to a weaker Yen, which has sent Nikkei to 10-month high as of today. This has by far helped drive significant gains across major Asian markets as booming U.S economy data has propagated expectations of interest-rate increase next month. Reportedly, The Nikkei Stock Average has been up at 0.8% after trading its highest level since Jan. These changes are coming at a time when the DXY Dollar Index has been on a consistent eight-day advance, which marks the longest extend in the last 3 years.