Market Overview 2017-12-29
Trading in U.S. equities was approximately 40% below the 30 day moving average on Thursday, despite this the major equities markets in the USA experienced rises during the New York session. The medium to high impact economic calendar news generally missed the targets, adding to concerns regarding how much room the equity markets have to grow in 2018 if, (as suspected by many analysts), the recent tax cuts have already been priced in. The advanced goods trade balance for November missed the prediction, by registering a -$69.7b deficit, whilst wholesale inventories in the USA grew by 0.7% during the month.
The U.S. dollar sold off versus yen on Thursday, slumping by (at one point) approx. 1.3%, before retracing to close out the day down circa 1%. Based on the 2017 data, the U.S. dollar index is facing its worst annual performance in a decade, despite three rate interest rate rises over the past year and the current base rate being significantly higher than the central banks of: Europe, Britain and Japan.
Gold has continued its recent recovery, reaching a daily high of 1295 on Thursday, whilst breaching the 100 DMA sited at 1287, the critical $1,300 per ounce handle could now prove to be a barrier, based on the concentration of orders that may be clustered around this key handle. The safe haven appeal of the precious metal on Thursday was matched by similar investment in yen and the Swiss franc. In a quiet day for specific economic calendar releases relating to Europe’s main economies, European markets were negatively impacted by Italian politics, with the news that the Italian president had dissolved parliament and new elections will take place on March 4th. Early projections suggest both a hung parliament and as a consequence political and potential banking turmoil in the country. Eurozone equity markets sold off sharply mainly as a result of the news. The euro was mostly stable, making solid gains versus several of its major peers. The euro rose in a daily bullish trend versus the U.S. dollar, rising by circa 0.6% on the day, printing an end of day level not seen since late September.
When nothing happens, EUR/USD rises. Why? The euro-zone enjoys a wide trade balance surplus, mostly thanks to the German export machine. The US has a significant trade deficit. So, the flows of importers and exporters lead to net euro buys and net dollars sales.