It appears that the dollar’s strongest rally in over a decade is gradually coming to a halt. Growing uncertainty on the Federal Reserve’s next move is threatening to bring the dollar back to reality. To make matters even more volatile, a fresh rally in China caused the yuan to surge. This explosive growth in China aims to stem capital outflows. Stocks faltered as major retailers in the US missed their estimates. On the bright side, gold continued to rise along with treasuries. This batch of mixed news is highlighting concerns about the future of the US economy.
Dollar Falters as Gold & Treasures Climb
“The trigger for dollar weakness was the Fed minutes,” said Richard Falkenhall, a strategist at SEB AB in Stockholm. “The general view is that there’s a lot of uncertainty on what to anticipate when it comes to fiscal policy going forward. The market has already been pricing in a lot when it comes to Trump expectations, so this was a bit of a natural reaction at this point” for the dollar to falter.
The dollar’s valiant comeback faltered for a second day straight. Fed deliberations & central banker concerns are threatening to put an end to the greenback’s 14 year high. According to the Bloomberg gauge, the dollar was trading 0.6% lower after major companies failed to increase jobs in December.
The dollar isn’t the only thing that’s faltering, US stocks also experienced a sudden blow. The S&P 500 Index slipped 0.2%, putting it at 2,266.97. This was the first decline in three days, which put the index only 5 points shy of an all-time closing high. Many attribute this surprise dip to disappointing holiday sales. Kohl’s Corp lost a devastating 16%, Macy’s Inc. plunged 12% & Gap Inc joined the free-fall with 5.5% declines. This shocking display of lackluster holiday spending is putting doubts on the spending power of US consumers.
Currencies around the world rallied as the dollar started losing wind. China’s yuan swelled by 0.5% after making a surprise 1.4% jump on Wednesday. The euro also gained 0.2%, leaving it at $1.0513. Russia’s ruble made a stunning 1.5% comeback, allowing it to finally breach 60 per dollar. This monumental achievement was the first time the ruble hit these figures since July 2015. Mexico’s peso also made a comeback after they erased losses when the central bank sold dollars. These figures are backing up a startling trend of the US versus the world.
Commodities continued to advance in the face of global uncertainty. Gold soared by 1%, leaving it at its highest rate in a month. Precious metals joined gold’s rally. Aluminum enjoyed a 0.7% gain, nickel rose 0.3% & Zinc also rallied by 0.4%. OPEC agreements led to crude rising 0.7% to $53.61 a barrel. This steady growth reflects increased optimism as oil stockpiles are set to decline.
The curtain may be closing on America’s strongest rally, but the future still looks bright for the international market. Commodities remain high, & even though they are faltering the dollar & US stocks are in still good shape. China’s surprise rally is offering fresh competition, but whether this bravado will last remains to be seen. A majority of the word’s currencies are bouncing back after the slump following Trump’s victory. This shake up is signaling that things are finally returning to normal after a major political upset.