Fundamental Analysis

Dollar Strengthens Against Major Currencies, Stocks Plunge


April 20, 2018
US Equities
Early this year, US stocks were threatened by the rise in yields, US major indices tumbled more than 10%. On Thursday, US 10-yr yields rose to the highest level in a month, weighing on US indices. In addition, US Treasury is considering ways to restrict Chinese Investment in the US. Last year Chinese acquisitions in US dropped to $31 billion from $53 billion is 2016. Chinese ambassador to US, confirmed that China will retaliate to any trade war measures taken by the United States.

The dollar index gained for the third consecutive day as U.S. bond yields continued to rise. US dollar advanced after soft economic data from other economies, showing that the US economy is more solid which will signal that the Fed will continue in increasing interest rates and widen the gap in monetary policy between the US and its rivals.

The British pound dipped below $1.41 , after economic reports signaled that a slowdown in the United Kingdom economy might be on the way. This week brought us major economic data releases such as wage growth, inflation numbers, and retail sales. All the figures were disappointing and came in weaker than anticipated, which put the Sterling under pressure. Moreover, the Bank of England governor Mark Carney pointed out that there are other BoE meetings this year, lowering the chances of a rate hike in May.

The Canadian dollar traded at almost two weeks low against the US dollar, breaking out from one week trading range. The Canadian dollar weakened after Bank of Canada Governor preferred interest rates staying lower than neutral. On the other side, NAFTA decision is still a key in CAD trading, knowing that the 1st of May is a deadline for the deal. In terms of data, Consumer price index and retails sales figures are due today.

Gold is trading in a tight range between $1333 and $1365 waiting for new developments which will boost the appetite of investors for buying gold. Gold suffered yesterday, as US bond yields rose.

Oil prices slipped on Thursday, but is still trading near three years high. Oil is being supported by different factors such as the geopolitical unrest, OPEC output plan, and the drop in Venezuelan supply. The only factor that can put some pressure on oil prices is the rising production in U.S. oil due to the booming shale industry. U.S Baker Hughes oil rig count is due today.
Major Economic Events

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