Advertisement
Advertisement

Safe-haven Yen, Swiss Franc Weaken, Aussie Rallies in Quiet Holiday Trade

By:
James Hyerczyk
Published: Jul 4, 2016, 14:41 UTC

It was a relatively quiet day in the financial markets on Monday as most of the major players took to the sidelines as the U.S. celebrated its

US Dollar Index

It was a relatively quiet day in the financial markets on Monday as most of the major players took to the sidelines as the U.S. celebrated its Independence Day. Despite the below average volume, there were some good moves as some markets steadied after a week of turmoil on relief from some of the anxiety caused by the U.K.’s vote to leave the European Union on June 24.

Traditional safe-haven currencies like the Japanese Yen and Swiss Franc traded sideways-to-lower as European stock markets continued to stabilize. The USD/JPY finished at 102.606, up 0.145 or +0.14% while the USD/CHF posted a modest gain of 0.0005 or +0.05% at .9729.

The most popular currency of the day was the Australian Dollar. The AUD/USD rose sharply to .7528, up 0.0031 or +0.41%. Volatility in this Forex pair was driven by week-end election results that failed to show a clear winner after more than two-thirds of the votes were counted.

Initially, investors were spooked by the news because of worries that the Australian credit rating could suffer because of economic uncertainty. However, the market quickly recovered after the early session setback. Traders largely ignored the possibility of a rating cut and instead focused on the Fed’s current monetary policy which highlighted the central bank’s decision to be remain cautious about raising interest rates too quickly.

The current strength in the equity, commodity and commodity-linked currency markets indicates that investors are responding to the current low interest rate environment and expectations of additional stimulus.

Bond markets around the world have been particularly strong since the Brexit vote with U.S. Treasury yields falling sharply and British gilts yields tumbling to record lows. This price action suggests that investors have priced out any chance of a U.S. rate hike this year while pricing in the possibility of a rate cut.

Last week’s warning from Bank of England governor Mark Carney of additional stimulus this summer starting with a rate cut in July appears to have been priced into the gilt market. The GBP/USD appears to have stabilized along with the EUR/USD as the impact of Brexit starts to fade as the main market driver and as investors shift their focus to promises of more stimulus and talk of UK corporate tax cuts to offset the shock of leaving the EU.

In other markets, although the U.S. Comex exchange was close for the holiday, spot gold continued to trade, rallying 0.7 percent to $1351.35. Silver was up 2.7 percent at 20.29 per ounce. Additionally, it was reported that holdings in the world’s largest gold-backed exchange-traded fund, SPDR Gold Shares, rose 3.9 tonnes to 953.91 tonnes on Friday, the highest since July 2013. In the first half of the year, the fund’s holdings increased by 308 tonnes, its biggest half-yearly increase in seven years.

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

Did you find this article useful?

Advertisement