Monday saw the global equity market at five year highs resulting in a steady gain in the dollar value. The gain was bolstered by the favourable view of the stocks by the investors worldwide while waiting for the Federal Reserve’s stimulus program.
Last week has been a turbulent one, rooting from the US political impasse regarding the debt deal. The resulting 16-day government shutdown delayed the US Federal Reserve to scale back its stimulus program, although, the Fed’s intervention has led to a moderate growth in the US market. Nonetheless, much important decisions were pushed into the next year favouring the stocks for the Wall Street trading.
Some financial strategist are of the opinion that the economy of the United States cannot stand anymore tapering right now as it started to lose its vigour, well before the political debacle.
Though there has been a steady gain in the value of the dollar vs. yen, the dollar still remains at a vulnerable spot. Experts forecast each Fed meeting to weaken the dollar value. Many even expect the Fed to reduce its stimulus next year. Now, only time will tell if, tapering in Fed’s bond-buying programme is possible or not in the scheduled December meeting, this year.
The shutdown has caused a disruption while the investors’ hope remains for any gain in the momentum in the economy. The dollar index has been struggling near an 8-month low and after the US debt deal impasse; the dollar index value is at a steady 79.675 which is a far cry from its lowest level of 79.478 since February.
The currency futures position has subsequently increased their net long position to a comfortable 65,844 contracts, this past week. Some solid corporate earnings have necessarily lifted the European shares. Euro’s steady value has indeed led to the slowing of the speculations on bullish bets. The euro has edged up to 0.1 percent against yen while the dollar has edged up to 0.2 percent. It is now currently rallying towards a three weeks high.
Market experts anticipated new jobs near the 180k level in the US payroll data that was expected on Tuesday, though only 148k jobs were created. The last two months have witnessed many reforms prompting the previous payrolls to be revised down. Experts have also predicted for job growths in the future and the unemployment rate to remain calm. The focus has now shifted as the outcome was much weaker then expected in the US payroll data.
The pressure of the US debt deal crisis also resulted in the slip of crude oil prices to $100 per barrel. US crude oil stocks have almost doubled in effect. This is indeed the biggest retreat concerning crude oil, in the last 11 months.
Analysts all over the world have rightly forecasted to see some sort of volatility in the currency market in the near future. The currency market is in a tight spot right now and the way things are turning out, who is to blame really?