Today was a pretty interesting trading day. The European and American stock markets rallied to new highs on mixed economic data release from both sides. The US dollar surprised with a sustained rally throughout the trading hours and while Gold and Silver stood still.
The economic calendar showed today an European Trade Balance slightly under estimates, at 16.0B and a lower than expected PPI (0.4%, but an increase in the core PPI% – 0.3%) followed by the Empire State Manufacturing Index, published at 12.5 (beating the 3.2 estimates) for the United States. These publications wouldn’t have been enough to move the market that munch in the positive grounds.
The FOMC member, Evans, had some interesting things to say in his current speech. He is backing up his bass, Janet Yellen (the new Federal Reserve chairman). Evans said that he has confidence that the US economy is picking up the pace and that signals of a reviving are already here. He believes that the QE tapering will continue in January and that it could get more aggressive in March.
In the Beige Book it was written that the economy is expanded at moderate pace in most regions. The retail sales are up in three-quarters of districts, manufacturing growing steadily in most districts; also two-thirds of districts reported increases in hiring and some expect a pick-up in growth.
These are pretty good motive for the dollar to rally. Less Quantitative Easing means that it will be fewer dollars at the same demand, in a raw logic. This usually ends up with an increase in the price of the instrument, which actually happened. The dollar gained until now 0.56% in front of the Euro; 0.42% in front of the cable (GBP); 0.56% in front of the aussie (AUD); 0.08% in front of the loonie (CAD) and 0.5% in front of the kiwi (NZD).
In these conditions the stock market should have plunged. But this wasn’t the case, on contrary they rallied. We could tend to believe that just like before the economic crisis, started in 2008, strengthen of the US dollar triggered rallies in the stock market. But I don’t believe that this would be the case, at least we should wait some time before getting to such conclusion. Today the rally on the stock market could have been triggered by the World Bank, which raised its growth forecast as the richest nations strengthen.
Dow Jones Industrial +0.75%; S&P500 +0.51%; NASDAQ Composite Index +0.75%; EUROSTOXX +1.58%; DAX +2.03%; FTSE100 Index +0.78%; NIKKEI225 +2.50%; Hong Kong Hang Seng Index +0.49%.
The rise of the US dollar doesn’t help the commodities market. A strong dollar usually triggers drops in the price of the most traded commodities. As the Dollar Index gained 0.46% today, the price of gold, silver, and agricultural commodities dropped.
Cred Oil WTI +1.56%; Crude Oil Brent +0.69%; Gold -0.67%; Silver -0.95%; Wheat -1.99%; Corn -1.33%;