FX markets reopen quietly after the New Year break
Traders began to quietly re-engage with the FX markets, as Tokyo and Sydney opened on Monday evening/Tuesday morning. After a fractured ten day holiday period, over the Xmas and New Year period, London’s open will be closely monitored. Last week’s trading ended the year with gold (XAU/USD) finally breaking the critical 1,300 handle after slumping to 1,236 in early December. Analysts are beginning to draw a correlation between gold’s rise and bitcoin’s slump, with the virtual peer to peer crypto rising to just under 20,000 in December, then falling to approx. 10,600, before recovering a significant proportion of losses as price reached 16,000+. 2018 opened with a protracted fall, down to circa 13,300.
However and it may be the time of year, as opposed to a lack of sentiment and confidence, BTC appears to be stuck in a wide range, with a negative/bearish bias. As to whether this continues, once markets fully reopen is questionable, given the highly volatile and unpredictability of the crypto currency. And with other cryptos such as ripple, iota etc making massive gains over recent days, the appeal of BTC may begin to diminish.
U.S. equity markets reached record highs during last week’s trading sessions, but with the Trump tax reduction programme now signed into law, analysts and traders may calculate that the tax breaks are now fully priced in. Can USA equity markets possibly replicate their incredible performance of 2017? From a fundamental standpoint analysts would struggle to come up with a coherent argument for saying yes, but as many of us have come to realise over recent years, Keynes’ timeless quote that; “markets can stay irrational longer than you can stay solvent” is always relevant, markets are inherently difficult entities to attempt to predict the outcome of, particularly over the longer term.
WTI oil breached the $60 a barrel handle during last week’s sporadic trading, its highest level since June 2015 and copper reached highs not seen since July 2014. Whilst position traders of commodities (who are long) might reap the benefits, this development may have a more sinister impact for ordinary consumers, given how dependent we are on basic commodities to keep the wheels of global commerce turning. If commodities enter into a prolonged bullish trend then inflation will inevitably rise and central banks will be stuck between a rock and a hard place; needing to raise rates, but knowing that asset prices will fall as a consequence. On Wednesday the minutes from the December FOMC meeting will be published, it’ll be interesting to note their comments on inflationary threats.
In early trade in the Asian session on Tuesday morning, the euro rose versus its main peers; sterling, yen and the U.S.dollar. The U.S. dollar rose moderately versus yen, Swiss franc and the Canadian dollar. Both Australasian dollars opened mixed, down marginally versus the US. dollar and U.K. pound, but up versus several minors and yen.
KEY ECONOMIC CALENDAR EVENTS FOR JANUARY 2nd.
• EUR. Markit/BME Germany Manufacturing PMI (DEC F).
• EUR. Markit Eurozone Manufacturing PMI (DEC F).
• GBP. Markit UK PMI Manufacturing s.a. (DEC).
• CAD. RBC Canadian Manufacturing PMI (DEC).
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