• Sterling set to remain highly vulnerable to Brexit headlines
• Dollar enjoyed surprise rise to ten-month highs following Donald Trump’s election
• Japanese yen bears watching based on Bank of Japan’s shifting policy focus

2016 has certainly delivered some surprise events in terms of global politics. The ramifications of decisions taken this year are likely to be felt a long way into the future. Foreign exchange markets have certainly felt the impact already, with political events, speculation about the health of the global economy and monetary policy developments adding to traders’ daily analysis of a deluge of economic data. All of this plays into the valuation of currency pairs.

Evdokia Pitsillidou, Risk Management Associate at pioneering forex and CFD broker easyMarkets, explains,

“Every so often, a major political event transpires that rocks the currency market, bringing with it unprecedented levels of volatility. 2016 has produced at least two of these events in the form of Brexit and the US presidential election result. These political forces have created serious volatility in the market but have also created some interesting opportunities, particularly in terms of currencies to watch over the remainder of this year and the start of 2017.”

The pound has been under scrutiny since the UK’s decision to leave the European Union on 23 June. The referendum’s outcome triggered the biggest ever selloff in the history of the British pound. Sterling plunged at a double-digit percentage pace against the dollar immediately following the news of the Brexit decision. It went on to hit 168-year lows in October 2016 after Prime Minister Theresa May vowed to pursue a “hard Brexit.

Sterling has recovered in November, but continues to trade near 31-year lows. The outlook on the currency remains bleak as policymakers roll out a timeline for the formal Brexit process.

It goes without saying that the British pound should be on every currency trader’s radar. The pound remains highly vulnerable to Brexit headlines. This actually served as a positive for the GBP/USD earlier this month, after the British High Court ruled that Brexit cannot be implemented without parliamentary approval. Theresa May had previously pledged to initiate Article 50 of the Lisbon Treaty by the end of March 2017. Article 50 is the mechanism by which EU members can formally withdraw from the bloc. May has vowed to fight the court’s legal challenge and remains confident that Brexit means Brexit.

The dollar has also been impacted by recent political events, with Donald Trump’s election as the 45^th President of the United States on 8 November sending global financial markets into disarray – at least initially. By November 9, US stocks were back on the offensive, while global equities also rebounded. The presidential election result was a boon to the US dollar, which quickly rose to ten-month highs against a basket of other major currencies.

easyMarkets’ Evdokia Pitsillidou comments,

“Many analysts had tipped the dollar to fall on a Trump victory. However, the complete opposite occurred, as investors turned optimistic on Trump’s proposed tax reforms and fiscal spending plans.”

Speculation regarding the Federal Reserve’s plans has also been affecting the value of the dollar. The greenback was tracking higher weeks before Trump’s election, based on growing bets the Fed would raise interest rates on 13-14 December. Federal Reserve Vice Chair Stanley Fischer told a conference last week that the case for a rate hike is “quite strong.”

The Japanese yen is also a currency that should be on traders’ radar for the remainder of 2016. The Bank of Japan’s policy overhaul a few months ago saw its focus shift from quantitative easing to interest rate targeting, following years of failed stimulus. Japan has been in deflation for seven consecutive months, and while economic growth has improved, the underlying trend remains weak.

The yen has been the strongest major currency for much of 2016, thwarting the Bank of Japan’s attempt to stimulate the economy. However, renewed bullishness in the dollar has finally made a dent in Asia’s safe-haven currency. October was the strongest month for the USD/JPY in two years. The pair was last seen trading at five-month highs.

easyMarkets’ Evdokia Pitsillidou concludes,

“In times of such immense political uncertainty, financial markets will remain highly sensitive to goings on around the world. However, the swift recovery of the US stock market and the rise of the dollar following Donald Trump’s election victory shows that markets can still be resilient. This means that traders who act fast are likely to be able to maximize the benefits of political events, particularly so far as currencies are concerned.”

For further details, visit www.easymarkets.com, email pr@easymarkets.com or call +44 203 1500 748.

Risk warning: Forward Rate Agreements, Options and CFDs (OTC Trading) are leveraged products that carry a substantial risk of loss up to your invested capital and may not be suitable for everyone. Please ensure that you understand fully the risks involved and do not invest money you cannot afford to lose. Our group of companies through its subsidiaries is licensed by the Cyprus Securities & Exchange Commission (Easy Forex Trading Ltd- CySEC, License Number 079/07), which has been passported in the European Union through the MiFID Directive and in Australia by ASIC (Easy Markets Pty Ltd -AFS license No. 246566).

• ‘October effect’ sees many traders fretting about this month
• October 1987 saw the Dow drop by 22.6% in 1 day (Black Monday)
• October in fact no different for traders than any other month (easyMarkets)
• dealCancellation provides actual and psychological way to beat the October effect

October has something of a bad reputation in financial circles. The Panic of 1907, the Crash of 1929 and Black Monday in 1987, when the Dow plunged by 22.6% in just one day, all took place in October. These events have left investors with a sense of caution when the prospect of taking risks this month comes up.

Nikolas Xenofontos, Director of Risk Management at pioneering forex and CFD broker easyMarkets, explains,

“In reality, trading in October is no more or less risky than trading in any other month. Market crashes can happen at any point during the year – the key is to keep a close eye on global events and upcoming reports that could impact on market movements during the course of the month. It’s a sound approach, whatever the month may be.”

The ‘October effect’ is actually not borne out by statistics, but its psychological impact is nonetheless very real. The fear of what the market may do is enough to give many traders pause. And this October there’s certainly plenty going on around the world that could have an effect on global markets.

On 3 October 2016 a deluge of manufacturing PMI reports will be released by the US and Europe, along with the TD Securities Inflation report in Australia. Australia’s Reserve Bank will release its latest interest rate statement the following day.

On October 5 the European Central Bank will release its Monetary Policy Meeting Accounts and two days later the US nonfarm payrolls report in the US will be influential in the Federal Reserve’s deliberations over whether to raise interest rates before the end of the year.

By mid-month the focus will be on China, with an influential trade report on 13 October followed by reports on producer and consumer inflation the following day. Industrial production figures from the US and Japan on 17 October, UK and US inflation data on 18 October and China’s Q3 GDP figures on 19 October may also serve to impact on markets around the world.

As October winds down, Australian employment figures, the policy meeting of the European Central Bank, US manufacturing PMI and UK and US Q3 GDP data all have the potential to create ripples in the markets, keeping investors on their toes. The general winding up towards the US presidential election on 8 November 2016 could also be an influential factor.

So are traders right to be nervous of October? easyMarkets’ Nikolas Xenofontos thinks not.

“October really is no different for trading than any other month – apart from having a rather underserved reputation,” he comments. “Although for those who remain uneasy our dealCancellation service provides the ideal way to undo a losing trade within 60 minutes – so there’s some peace of mind for those suffering from fear of the October effect!”

For further details visit www.easymarkets.com, email pr@easymarkets.com or call +44 203 1500 748.

Risk warning: Forward Rate Agreements, Options and CFDs (OTC Trading) are leveraged products that carry a substantial risk of loss up to your invested capital and may not be suitable for everyone. Please ensure that you understand fully the risks involved and do not invest money you cannot afford to lose. Our group of companies through its subsidiaries is licensed by the Cyprus Securities & Exchange Commission (Easy Forex Trading Ltd- CySEC, License Number 079/07), which has been passported in the European Union through the MiFID Directive and in Australia by ASIC (Easy Markets Pty Ltd -AFS license No. 246566).

• Gold futures up by 5.7% since China’s February 2016 Golden Week
• Highs of $1,400 per troy ounce possible in the short term
• US monetary policy uncertainty having notable impact on gold prices at present 

National Day Golden Week will see workers across China down tools for a week of celebration. On 1 October, National Day celebrates the founding of the People’s Republic of China, followed by seven days of holiday that many spend travelling, feasting and enjoying time with family members.

China celebrates two Golden Weeks every year, with Chinese Lunar New Year Golden Week having taken place from 9-13 February 2016. With a focus on all things gold, Sun Yu, Dealing Room Manager at pioneering forex and CFD broker easyMarkets, has been considering the journey that gold prices have been on between that last Golden Week and this one. He explains,

“It has been a rollercoaster year for gold prices. Since the last Golden Week holiday February 9-13, the yellow metal has entered into bull market territory and set fresh multi-year highs. But the rally has been anything but steady. As we approach the second Golden Week holiday of the year, gold prices are on a downward spiral amid confusion about US monetary policy.”

Gold futures surged during the February Golden Week, adding 3.3% to $1,239.40 a troy ounce. By 16 September, the futures price was up another 5.7% to $1,310.20. Several key developments occurred in between, not the least of which was Britain’s shocking decision to leave the European Union (EU) on 23 June 2016. The vote triggered the biggest stock market selloff in history, wiping out more than $3 trillion from the global exchanges in just two days. Investors quickly entered into risk-off mode, sending gold prices to 27-month highs. Prices would continue higher over the next several weeks, reaching a new high of $1,372.60 on 2 August. That was the highest settlement since March 2014.

Gold prices are now down nearly 5% from their August highs, but expectations are high that they will ascent to new heights quite quickly, perhaps even reaching $1,400 over the short term. Much of this will depend on US monetary policy. It’s a coin toss whether the Federal Reserve will raise interest rates this year, according to the Fed Fund futures prices.

The Fed is widely expected to continue hiking interest rates over the medium term, despite the vast majority of other major central banks working to ease monetary policy. Higher interest rates might be a boon to the US dollar, but at the expense of greenback-denominated commodities such as gold. easyMarkets’ Sun Yu continues,

“Gold is one commodity to watch carefully as National Day Golden Week approaches. We’ve seen a price increase of 25.22% since January and there’s certainly scope for further rises, but sensitivities to the activities – including the predicted activities – of the Fed will remain influential in the short-term.”

For further details visit www.easymarkets.com, email pr@easymarkets.com or call +44 203 1500 748.

Risk warning: Forward Rate Agreements, Options and CFDs (OTC Trading) are leveraged products that carry a substantial risk of loss up to your invested capital and may not be suitable for everyone. Please ensure that you understand fully the risks involved and do not invest money you cannot afford to lose. Our group of companies through its subsidiaries is licensed by the Cyprus Securities & Exchange Commission (Easy Forex Trading Ltd- CySEC, License Number 079/07), which has been passported in the European Union through the MiFID Directive and in Australia by ASIC (Easy Markets Pty Ltd -AFS license No. 246566).

• Oil prices dealt triple blow by reduced demand, electric cars and renewable energy (easyMarkets)
• Renewable energy to account for 26% of global energy supply by 2020 (IEA)
• 35% of cars worldwide will have electric capability by 2040 (Bloomberg New Energy Finance)

Oil prices may have rallied slightly over the past week, but it’s little consolation for producers who are now two years into the protracted slump. In late July, West Texas Intermediate crude futures plunged back down to $40 a barrel. Brent crude, the international benchmark, wasn’t far behind. With hopes of a production freeze fading, the reality of oversupply continues to bog down the market.

But it’s not just the global glut of oil, generated largely by increased production in the US, Canada, Iraq and Russia, that is responsible for the industry’s continued struggle to make production worthwhile.

Nikolas Xenofontos, Director of Risk Management at leading online trading services provider easyMarkets, explains,

“We’re facing a substantial glut in oil thanks to new production techniques and more efficient production, but that’s only half the story. Global demand for oil is dropping and that is keeping prices bobbing around at the low levels we’ve seen for the past couple of years. China’s slowdown means there is less need for oil in Asia, which has had a notable impact on demand levels. Supply has increased at the same time as demand has fallen, so we’re not likely to see oil prices pick up significantly any time soon.”

Following the historic climate deal in Paris, in which nearly 200 countries participated, Russia, Saudi Arabia, Kuwait and other major oil producers have announced plans to overhaul their energy strategy in order to diversify away from fossil fuels. Crude oil is no longer seen as reliable in generating the state revenues needed to foster economic growth and development. Instead, investment is being diverted to renewable energies, with environmentalists around the world rejoicing that market forces are now pushing nations towards cleaner fuel forms.

According to the International Energy Agency (IEA), renewable sources accounted for 13.2% of global primary energy supply in 2012, rising to 22% of worldwide electricity generation in 2013. Looking forward, the IEA has projected that the share will rise to 26% by 2020.

Hybrid and electric vehicles look set to deal a further substantial blow to the oil industry over the coming years. According to analysts, a shift is under way that will lead to growing adoption of electronic vehicles in the next decade. Battery prices fell 35% in 2015, meaning electric vehicles have suddenly become more affordable. This says nothing of the growing efficiencies automakers are introducing to make their hybrid and electric vehicles more affordable.

By 2040, long-range electric cars will cost around $22,000 in today’s dollars, according to a new report by Bloomberg New Energy Finance. By then, about 35% of new cars worldwide will have electric capability.

While electric vehicles are not expected to impact crude oil demand in the short term, this will change over the next decade, plunging another stake into a market that is already struggling with an oversupply of around 2 million barrels per day.

In the longer-term, the rise of greener forms of transportation could be the death knell for the oil industry. Some analysts are predicting that it will be at least a decade until oil returns to commanding prices of $90-$100 per barrel, as was considered the norm up until about mid-2014. Others believe that the development of alternative fuels over that decade might mean that oil’s heyday has passed once and for all. Only time will tell.

For further details visit www.easymarkets.com, email pr@easymarkets.com or call +44 203 1500 748.

Risk warning: Forward Rate Agreements, Options and CFDs (OTC Trading) are leveraged products that carry a substantial risk of loss up to your invested capital and may not be suitable for everyone. Please ensure that you understand fully the risks involved and do not invest money you cannot afford to lose. Our group of companies through its subsidiaries is licensed by the Cyprus Securities & Exchange Commission (Easy Forex Trading Ltd- CySEC, License Number 079/07), which has been passported in the European Union through the MiFID Directive and in Australia by ASIC (Easy Markets Pty Ltd -AFS license No. 246566).