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Financial markets in 2016: central banks, China and the oil prices
Published 13. 01. 2016
The central banks had the biggest influence in the Forex markets in 2015. The most prominent moments were definitely at the start and at the end of the year. On 15th January, the governor of the Swiss Central Bank removed the so-called “Peg,” which was artificially keeping the exchange rate between the euro and franc above 1.20 and generating significant movements in the markets. The rate between the two currencies fell within twenty minutes to a minimum of 0.85, quickly recovering later back above the parity. Also in January Mario Draghi announced the start of QE, totalling more than 1,000 billion euros.
In December all eyes were firmly on the ECB and the Federal Reserve. The Frankfurt based institution prolonged stimulus measures until at least spring 2017, but did not increase the amount of monthly QE set at 60 billion. Meanwhile the US Central Bank, after teasing the markets, announced its first interest rates hike after nearly a decade, an increase from 0.25% to 0.50%.
Between these dramatic two months we had a long wait, with other important stories circulating such as the problems in Greece, the concerns about slowing growth in China, the collapse of the oil price and the election in the UK – where the conservatives were re-elected.
What can we expect to see in 2016?
Recent events would suggest that the new year is starting in a similar way to 2015. On the European side, Mario Draghi’s decisions will remain central in continually guiding the Old Continent against deflation and the “zero growth”; while another major question lingers over the UK – Brexit? The world will once again be anxious for Yellen’s decision and whether there will be one or more further rate rises for 2016. The political scene for the US will also be a hot topic amidst the US elections and as they bid farewell to Obama.
The growth of China will still be the central to the whole of Asia. However, the progress and the result of the Dragon economy, will also interest the entire Oceania, so closely linked in terms of economic performance with China and the other major economies. We could see significant impact also on the commodities markets, which are still in a bearish cycle that has lasted for three years. Among these we must remember the collapse of oil prices; in the summer of 2014 it was over the 100 dollar per barrel, at the beginning of 2016 it was below 40$. We can’t forget the challenges facing gold! The yellow metal is not too far from the 1,000 dollars an ounce mark, about 40% less than the peak reached in 2011, which was over 1 900 USD/ounce.
Carlo Alberto De Casa
Carlo Alberto De Casa is Chief Analyst for the derivatives broker ActivTrades London.
He worked for Bloomberg in the City of London before joining in 2011 the Forex Broker ActivTrades, where he is specialized in Forex and Commodities markets. He has cooperated with “La Stampa” and other newspapers to publish in 2014 a book about gold (“I segreti per investire con l’oro” – Hoepli).
The thoughts and opinions expressed here are solely those of the writer and do not necessarily reflect the view of ActivTrades Plc. This commentary is for information purposes only and should not be considered investment advice. Any forecasts given are not a reliable indicator of future performance and the decision to act on any ideas and suggestions presented is at the sole discretion of the reader.