Weekly Trading Forecast: December Expectations Face Themes Like Brexit, Data Like NFPs
December is historically one of the more quiet trading periods of the year. However, an antsy market heading towards protectionism makes a docket loaded with events like US NFPs, an OPEC meeting and BoE stability report a trading minefield.
Though the ICE Dollar Index (DXY) closed out this past week at its highest level in over 13 years, the currency’s primary effective driver – rising Fed rate forecasts – is quickly burning off its fuel. Can the expectation of 2017 rate hikes pick up the responsibility for further Dollar gains?
With economic populism sweeping the Western world, the Euro finds itself sandwiched between the French Republican primaries and the Italian constitutional referendum. Meanwhile, the US Presidential election results are surprisingly coming into question, raising the specter of a rocky transition of power.
The British Pound may weaken amid a lull in top-tier news flow amid profit-taking following six weeks of consecutive gains and year-end portfolio readjustment.
Dollar strength strong-arming the Yen and its counterparts does have some merit, but such tail wind is limited. Risk appetite is similarly dubious as only US equities seem to enjoy the drunk optimism that would be extracted from the USD/JPY’s rate of climb. The true source of this move may be something as detrimental as capital flight.
The Australian Dollar may face renewed selling pressure as US data boosts Fed tightening expectations and Trump cabinet appointments continue to pour in.
The sharp rise in US yields since the US Presidential election have been the driving factor behind weakness in Gold. With US real yields running higher (US Treasury yields minus headline inflation), Gold’s appeal is understandably limited at present time.
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