We closed last week with the uncertainty over Fed’s decision on interest rates and finally Wednesday came with its news. The Federal Reserve has raised the interest rates at 0,5% for the first time in almost 10 years and what has happened during this week was due more or less to this, as was expected for some time. It was in 2006 the last time when US central bank moved up the interest rates and the 2008 since when the cost of borrowing is compressed at a minimum record.
Immediately after the announcement, the major US indices (S & P, Nasdaq and Dow Jones) increased. The dollar gained almost 0.8% against other major currencies. EUR/USD drops to 1,0886 to close at 1,096 at the end of the day.
The worst currency of the week was the pound which continues its negative trend. The psychological threshold of 1.5 was broken down again.
The currency more volatile, not to say crazy, was the yen that closes the week losing only 39 pips against the US dollar. When the Bank of Japan confirmed its ultra-expansionary economic policy and the BoJ Governor, Haruhiko Kuroda, has extended its plan to support the economy of Japan the USD / JPY swung of almost 200 pips in a matter of hours to literally collapse after that.
The Canadian dollar was not the worst of the week, but it continues to fall under the pressure of the low price of oil, of which Canada is one of the leading manufacturers and exporters in the world.
The price of oil, in fact, continues to slump and that is what happens every day. Oil prices are approaching the minimum of 11 years.
Brent futures that expire in February fell by 20 cents to $ 37.19 per barrel. The global benchmark lost 3.3% over the previous session. WTI futures expiring in January were down 5 cents at $ 35.47 per barrel, before ending up nearly 5% lower on Wednesday.
The International Agency supposes that also 2016 will be characterized by these prices. Higher US rates naturally support the dollar, making crude oil traded in dollars more expensive for holders of other currencies, pulling down the demand.
Meanwhile, Europe starts to see a slight economic recovery. During the week there was a series of good news. The European industrial production scored in October a + 0.6% from the previous month, after two months of contraction.
The sentiment on the economy in Germany rose to the highest point in four months in December, showing a certain optimism about the economic conditions of the strongest country of the Eurozone.
Instead, the Eurozone ZEW index rose to 33.9 points (less than expected), from 28.3 registered the previous survey. Also the number of people employed rose more than expected in November (+0,3%).
Gold continues to be under pressure even after the increase of US interest rates. This seems to have a negative effect on the yellow metal, which now threatens to update the minimum lowest of the last 6 years. The gold price on international markets fell below $ 1,050 per ounce.