The weakening US currency will bring back demand for gold and Japanese yen

Yesterday, two days expectation for the first Donald Trump’s press-conference ended without significant positive dynamics. Global markets prepared for gains, but the day ended reservedly. Europe gained slightly amid oil technical pullback. America also gained with NASDAQ  updating historic highs. The oil market proved to be the main driver as well – gas and oil sectors led the growth.

Europe and America

Today, European stock markets are trading lower, showing a negative reaction to the yesterday's press-conference of Donald Trump. US futures on main indices are in the red zone as well. There are unexpressed opinions, which start to circulate in the markets now that the Trump’s statements during the elections could be a kind of populism and lack of a clear program publication in the near future can lead the markets in the negative direction. Now, all the attention will be concentrated around Trump first steps, after the inauguration on January, 20.

Today, investors expect the publication of statement on last ECB's meeting  in December. At this meeting, the bankers, led by President Mario Draghi, expanded its quantitative easing program for nine months, until December 2017.

Consumer price Index in France rose by 0.3% in December from the previous month, as had been expected.

The volume of industrial production in Italy increased by 0.7% in November from the previous month, with growth forecast at 0.3%.

The volume of industrial production of the euro area grew by 1.5% in November from the previous month, with growth forecast at 0.5%.

The annual German GDP published 1.9%, higher than the forecasts of analysts who had expected growth of 1.8%.

Oil

Yesterday, Brent oil market gained in the area of ​​$ 55 per barrel, according to our expectations on the background of technical factors and US dollar weakness. Crude inventories data showed unexpectedly strong growth (+4.1 mln. Bbl.) In general, the news background remains negative for the oil market, and we expect sideway dynamics with the possible return of the market in the area of ​​$ 54.40 till the end of the week.


Forex

In the FOREX market US dollar decline intensified. Yesterday's press conference confirmed what the markets already were aware of and what everyone felt and what we had written about at the beginning of the week - US dollar rally seems to fade. Or there is  a massive US dollar correction in front of us. At current levels, the US currency is overvalued, and European and Japanese ones are underrated. In the near future we will see how the markets will equalize this imbalance. US Dollar Index (DXY) failed to overcome 2016 November-December highs. (103.50) Moreover, today the dollar index is trading well below our psychological level of 102 points. In our opinion, the Japanese yen may also be gaining momentum against the US dollar, and the price of gold should resume uptrend.

In general

The first press conference did not lead to strong global market gains or in the other hand to asset relocation. Yesterday's speech was not addressing economic issues, and no practical economic steps were discussed. FOREX market responded faster- reacted by US currency weakening and a significant gain in Japanese yen. As for the stock markets, there likely will be investors revaluation of expectations that will last till the end of the week. Today, the Yellen speech is in the market focus, and she is likely to try to calm the markets. We expect a rise in volatility throughout the day.

chart 01.2017

chart 01.2017

chart 01.2017