US dollar index is above 100 points

November 16, 2016

By IFCMarkets

US dollar continues strengthening

US stock indices and dollar advanced on Tuesday on positive economic data. US retail sales rose 0.8% in October which is above expectations. September reading was revised up from +0.6% до +1%. General increase in retail sales in September-October was the record high in almost 3 years. They rose 4.3% since previous year.

After the release of data, Atlanta Fed stated it expected the US GDP to rise by 3.3% in Q4 2016. US dollar index hit a fresh 11-month high yesterday and continues advancing today as investors anticipate the Fed rate increase on its next meeting on December 14, 2016. Today at 14-30 СЕТ the producer price index for October will come out. At 15-15 СЕТ the industrial production data will be released, the tentative outlook is positive.


Energy and utility stocks advance

European stock indices also advanced on Tuesday, mainly on higher energy stocks which followed rebound in global oil prices. Utility stocks also soared as they bring steady dividends. This happened on fallen yields of government bonds.

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Trade balance in Eurozone in September was additional positive as it was above the forecasts. Euro fell for 7th straight trading day amid higher dollar. Fed rates advance while ECB holds them negative or zero. No significant economic news came out today in Eurozone.

Nikkei surges again

Nikkei went on rising amid further weakening of yen. Mitsubishi UFJ Financial Group announced a buy-back of 1.69% tis stocks for 100bn yen. This pushed its stocks up by 4%, other financials surged as well. The volume of housing loans edged up 2.7% YoY in Q3 in Japan after the increase by 2.4% in Q2 which was another positive. On Thursday early in the morning the Tokyo department store sales for October will come out in Japan.

Oil on the rise amid unofficial OPEC meeting

Oil prices surged on Tuesday. Some OPEC members will meet to discuss the oil freeze deal as early as this Friday in course of Gas Exporting Countries Forum in Qatar. OPEC offers special conditions Libya, Nigeria and Iran which let the not to cut oil production. Iran produced 3.92 barrels of oil a day in October. It is planning to produce more than 4mln barrels a day.

Copper retreated after several major producers said in conference in China that copper will be in excessive supply in global markets the following 2 years. Head of Jiangxi Copper company was one of them, he added that the current price hike looked “irrational”. Many market participants fix profits expecting the release of the newly elected US president on stimulus to the US industry. This may take a couple of weeks.

Gold is descending, as expected, on stronger US currency. US dollar index reached its 11-month high when gold cost about $1055 per ounce. Now it is traded much higher. Market participants note that gold supplies in ETF funds fell just 5% since US presidential elections on November 8. In theory, this may mean that hedge funds are not in hurry to dispose of precious metals.

Most global meteorological agencies predict El Nino-Southern Oscillation with its cool phase La Nina in the 2016/17 cycle. It may lead to worse weather in major agricultural regions of the world and harm crops.

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