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Market Review, January 10, 2016

The USD dipped against a basket of major currencies yesterday, as the greenback continued to feel the downside pressure following the US nonfarm payrolls report for December, which showed a slowdown in hiring but the fastest wage growth in over seven years, supporting the case for further rate hikes this year.

Boston Fed President Eric Rosengren on Monday called for the U.S. central bank to step up the pace of interest rate increases, warning that inflation could overshoot its target if it does not. This caused for a bearish reaction, pushing the USD down again most major currencies as the question on everyone’s mind is “when will the next rate hike be and will that be too late to fight inflation?”.

The pound dropped a lot as fears over prospects for a ‘hard Brexit’ weighed. The selloff in sterling came after British Prime Minister Teresa May on Sunday said that the country would not be keeping “bits” of European Union membership. The remarks were seen as an indication that the UK won’t try to negotiate continued full access to the European single market when it leaves the EU.

Sterling failed to find support after May said on Monday it was wrong to say a “hard Brexit” was inevitable.

Crude oil prices dropped more than 2% yesterday, as signs of growing US production outweighed optimism that many other producers, including Russia, were sticking to a deal to cut supplies in a bid to bolster the market.

“We see the optimism surrounding OPEC and non-OPEC production cuts being counterbalanced by fears of higher U.S. crude production as the higher rig count of last Friday still weighs,” said Hans van Cleef, senior energy economist at ABN Amro.

The doubts about the future supply situation triggered profit-taking as traders fear they’ll end up losing a big part of their profits. Brent oil rose by approximately 30% since the OPEC and non-OPEC production cuts agreement.

Since the US elections, the precious metal gold had slid 12% in price. Since December’s low, gold prices have gone up by 5,5% and it appears that the commodity is gearing up for the Trump administration.

U.S. stocks were mixed after the close on Monday, as gains in the Healthcare, Technology and Consumer Services sectors led shares higher while losses in the Oil & Gas, Utilities and Telecoms sectors led shares lower.

 

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