Markets have really got into the Christmas theme, with a sea of red to kick off the holidays. The US Fed started it with their “Dovish hike”, raising their bench mark rate by 0.25%. Although this was relatively expected, it was by no means certain, and we saw immediate USD Strength on the back of it. They were somewhat dovish, paring back next years expected hikes to only two, however the market had been pricing in less hikes next year for the last few weeks, and for once reacted to what actually happened, rather than what was going to happen.
A lot of instruments didn’t like the hikes though. Stocks are off, with most US Indices at levels not seen since last year. Oil continues its horrible (great) run down, off another 4%. This takes it down 40% since only 3 short months ago. As you would also expect, currencies like the NZD and AUD are not liking the risk off move. There has been some pullback, but at one stage the Kiwi was almost 2% down on the day.
This leads to an interesting point to note over the holiday period. As markets become more and more illiquid, any moves you get can be really out sized, and it can actually get quite volatile. If there is a big buyer for something, having less sellers to soak up the volume means the price moves further than it normally would. In the same vein, Forward Points can blow out, and roll overs and pre-delivers can get a lot more expensive over the holidays than usual. If you know you have something settling in December that you know you won’t need, it may well pay too let us know earlier, rather than later.
We will be closed on all the major holidays, Christmas, Boxing and New Years Day. Will be back from the 2nd of January.
Merry Christmas and Happy New Year from everyone here at XE/HiFX.
Global equity markets are down across the board, Dow -1.78%, S&P 500 -1.59%, FTSE -0.80%, DAX -1.44%, CAC -1.78%, Nikkei -2.84%, Shanghai -0.52%.
Gold prices are up 1.1% trading at $1,267 an ounce. WTI Crude Oil prices continue their poor run, down another 4% overnight to $46.14 a barrel.