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US Dollar Hits a Fresh 14-Year High

Published December 20, 2016
  • The US Dollar bounced back to a 14 year high against a basket of major currencies (Chart 1) on further positive comments from Federal Reserve Chair Janet Yellen during a conference at the University of Baltimore yesterday  
  • In her first speech since last week’s rate hike, Yellen makes special note on the prospects of college graduates, stating that recent improvements in the economy have created one of the strongest job markets in years for graduates 
  • Federal Reserve Bank of San Francisco President John Williams also offered candid comments on the effect of Trump’s campaign rhetoric on current Fed monetary policy  
  • Citing data on unemployment, job growth, and inflation, Williams stated his decision to vote for a rate hike was largely unaffected by speculation on future fiscal policy 
  • The Canadian dollar weakened to a near three-week low against its U.S. counterpart on Monday as the recent drop in Canadian yields below U.S. Treasuries weighed in, the market bracing for divergence in monetary policy between the United States and Canada 
  • The Japanese Yen slid to a 10-month low after the Bank of Japan left monetary policy and interest rates unchanged at its last meeting of the year earlier this morning; officials did, however, raise its assessment of the economy for the first time since May 2015 
  • The euro faced renewed pressure as geo-political events shook the Eurozone; Russian ambassador to Europe’s close by neighbor, Turkey, was shot and killed on Monday while a few hours later an alleged terrorist attack involving a truck killing 12 people occurred in a Berlin Christmas market 
  • This, combined with Yellen’s positive comments from yesterday, has driven the Euro to a new 13-year low against the USD this morning; the safe-haven Swiss franc hit a six-month high against the euro and EUR is down half a percent against CAD today as well 
  • U.S. stock index futures were slightly higher this morning as investors reacted little to yesterday’s geo-political incidents, showing the market is becoming increasingly resilient to and adept at handling bad news 
  • Oil is holding this morning (Brent at $55.22, not far from the 17-month high of $57.89 seen last week) as trading starts to become thin in the run up to the holidays 
  • A high sentiment of skepticism lingers in the commodities market over the veracity of the OPEC oil producing agreement as traders look to 2017 to see if all parties can keep their word

 Charts: (1) US Dollar Currency Index (2) EUR/USD touches 14 year low