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EURUSD breaks above resistance - PM Bulletin
31 Jan 2017
Equities recover after Monday’s sell-off - AM Briefing
31 Jan 2017
Trending markets and Andrews’ Pitchfork -Trading Guide
30 Jan 2017
Investors rattled by Trump’s curbs - AM Briefing
30 Jan 2017
Dow holds above 20,000 as dollar firms - AM Briefing
27 Jan 2017
Dow breaks above 20,000 - Video Update
26 Jan 2017
Dow at 20,000 boosts risk appetite - AM Briefing
26 Jan 2017
Dow finally breaks 20,000 - PM Bulletin
25 Jan 2017
Wall Street leads stocks higher - AM Briefing
25 Jan 2017
Consolidation continues - Video Update
24 Jan 2017
Dollar recovery helps lift sentiment - AM Briefing
24 Jan 2017
Money management and stop-losses -Trading Guide
23 Jan 2017
Stocks fall on US protectionism fears - AM Briefing
23 Jan 2017
Trump inauguration in focus - AM Briefing
20 Jan 2017
A look-ahead to Trump’s inauguration - Video Update
19 Jan 2017
ECB President Draghi’s press conference in focus - AM Briefing
19 Jan 2017
Dollar steadies after sell-off - Video Update
18 Jan 2017
Equities drift in featureless trade - AM Briefing
18 Jan 2017
Dollar pull-back lifts precious metals- PM Bulletin
17 Jan 2017
Dollar slumps in early trade - AM Briefing
17 Jan 2017
Charting analysis for beginners - Trading Guide
16 Jan 2017
Sterling slumps on “Hard Brexit” concerns - AM Briefing
16 Jan 2017
Earnings in focus - AM Briefing
13 Jan 2017
Fourth quarter earnings in focus - Video Update
12 Jan 2017
Market Info Update: Martin Luther King Day Monday 16th January 2017
12 Jan 2017
Dollar lower as Trump skips stimulus talk - AM Briefing
12 Jan 2017
Trump news conference - Video Update
11 Jan 2017
Trump press conference in focus - AM Briefing
11 Jan 2017
Has gold turned a corner? - PM Bulletin
10 Jan 2017
Another mixed start for Europe - AM Briefing
10 Jan 2017
Trading Psychology - Trading Guides
09 Jan 2017
Sterling slips on "Hard Brexit" fears - AM Briefing
09 Jan 2017
Non-Farm Payrolls in focus - AM Briefing
06 Jan 2017
Non-Farm Payroll look-ahead - Video Update
05 Jan 2017
FOMC minutes viewed as hawkish - AM Briefing
05 Jan 2017
Look-ahead to release of FOMC minutes - Video Update
04 Jan 2017
FOMC minutes in focus - AM Briefing
04 Jan 2017
Strong start to 2017 - PM Bulletin
03 Jan 2017
Equities push higher in first session of 2017 - AM Briefing
03 Jan 2017
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There have been big gains for precious metals so far today. Gold has surged above resistance around the $1,200 mark while silver first nudged above, but has now pushed through $17 - an area which acted as a barrier to gains last week and also in early December. Both metals got a boost overnight from the sell-off in the US dollar. The greenback was sharply lower this morning after investors were rattled by comments from Donald Trump in an interview with the Wall Street Journal (WSJ). The interview took place last Friday but the WSJ only released this particular excerpt late on Monday night. In it Mr Trump expressed his view that the dollar is too strong, and that this meant that US companies would struggle to compete - particularly with China. In fact, Mr Trump emphasised that China should take a good proportion of the blame for the dollar’s strength by deliberately holding down the yuan. This is a rather controversial view as it’s apparent that China isn’t particularly happy with the yuan depreciation which has taken place since April. The Chinese authorities have imposed capital controls in an effort to stem the outflows of currency from the country. Also, back in the summer they sold US Treasuries and used the proceeds to buy yuan. Despite this the onshore USDCNY rate has appreciated by around 8% since April and came dangerously close to breaking above 7.00 at the beginning of this year - a level seen as a line in the sand for China’s policymakers. 

Since then the USDCNY has pulled back a touch, as has the dollar against other currencies. This time two weeks ago the Dollar Index hit its highest level in 14 years. Since then it has pulled back by just under 3% although this still leaves the index a touch above support around 100.00.

But it’s also the case that the Dollar Index is still up over 4% since the US presidential election in November. Ironically this is something which Mr Trump is happy to ignore when he accuses China of intervening to push its currency lower. While the conventional wisdom was that the dollar would weaken in the aftermath of a Trump victory, the opposite has been the case. Trump’s election promises of tax cuts, infrastructure spending and regulation roll-back have all boosted US growth and inflation expectations. At the same time the Federal Reserve is the only major central bank which has not only tightened monetary policy in the last year but which predicts more tightening to come. No wonder the dollar has shot higher over the last two months.

Some analysts think that the dollar’s rally may be over now that Trump has openly said that the greenback is “too strong.” If so, then gold and silver could have more upside - particularly if the Dollar Index breaks back below 100. However, this could just as easily be a long-overdue correction before another push higher for the greenback. After all, even if Trump talks down the dollar and delivers less than promised on fiscal stimulus, it will continue to be an attractive proposition if inflation turns higher and the Fed continues to tighten.

Disclaimer:

Spread Co is an execution only service provider. The material on this page is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by Spread Co Ltd or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.

 

Posted by David Morrison

Tagged: Bulletin PM

Category: PM Bulletin


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