Dollar Dips Down, Rally Pauses for Oil & Stocks: Market Update

The Federal Reserve released the minutes of its latest meeting yesterday. Many of the members were in favour of a December rate hike while others were worried that low inflation was more than just transitory.

The dovish comments put pressure on the dollar, now down 0.2% against a basket of major currency pairs. The dollar had priced in for an increase in the cost of borrowing for December, but given the lack of enthusiasm from key Fed members the rate hike seems less likely, thus investors shed some of their bullish bets on the greenback.

What’s bad for the dollar is good for the euro. The single currency has added 0.2% against the greenback as lower-for-longer US interest rates means investors plunge long bets into its number one alternative.

The euro has added about 1% to its value this week, now at an 11-session high. The currency is recovering nicely from the bearish tones set by the Catalan independence referendum.

The Japanese yen is 0.2% stronger against the dollar as investors grow increasingly concerned about North Korea’s missile programme. The demand for safe-haven assets doesn’t stop there, with gold up 0.4%, reaching a high of $1297.26.

Sterling is also 0.2% higher against the dollar, climbing for a fourth day in a row. The fifth round of Brexit negotiations are coming to an end. The lack of progress has caused British Prime Minister Theresa May to lay out a trade plan in the event that there is no deal with the European Union after the two-year negotiation period closes.

An update on Brexit talks will be given at noon in Brussels, which will give a fresh direction to both the euro and pound.

The Federal Reserve chair Janet Yellen may be replaced. US President Donald Trump will meet with Stanford University economist John Taylor this week to interview him for the position.

Oil is trading downwards after three consecutive days of gains. The rally paused as investors look to today’s US inventory report for confirmation that supplies are being kept down. The commodity will be particularly sensitive in any uptick in stockpiles.

Stocks are trading lower this morning as investors halt the rally which took the Nasdaq, Dow Jones and S&P 500 to record closing highs yesterday.

Financials are feeling the pinch of the view that interest rate may rise at a slower pace. Earnings season kicks off with major banks reporting on the inner workings of their balance sheets, which may give Financials the boost they need.

The Nikkei 225 ended at the highest point since 1996. Meanwhile, Australia’s SPI 200 is 0.4% higher despite mining companies losing traction thanks to a decrease in Chinese production.

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