Gearing Up for a Super Start to 2017
Dow Jones Industrial Average 1-Year Performance
2016 kicked off with concerns about the performance of the Chinese economy. For the first time in many years, the Chinese economic growth engine was slowing. The key 7% GDP growth rate per annum was being challenged and a massive decline in commodities demand was apparent. Steel, copper, and iron ore demand contracted sharply and this had a domino effect on commodities markets around the world. The rumour mill was rife with concerns that China’s economy was about to collapse.
Years of finger-pointing about China’s currency manipulation, protectionist measures, and unfavorable trading conditions towards Western countries finally had an outlet: the Chinese economy was overheating. Despite a sharp downturn on the Shenzhen Composite Index and the Shanghai Composite Index, the Chinese economy was saved. Intervention by the People’s Bank of China, and strict controls on share trading on executives helped to prop up Chinese markets. The CNY was allowed to float a little against the USD and this helped to power Chinese exports. Nonetheless, trillions of dollars were wiped off global markets and equities were persona non-grata.
USDCNY Pair 1-Year Performance
Fast-forward to June 2016. The Brexit referendum came as a complete and utter shock to the global community. Pundits were calling for a resounding rejection of a Brexit (British exit from the European Union). As fate would have it, Britons voted 52%-48% in favour of a Brexit. This sent colossal shockwaves through the global economy. The GBP/USD pair plunged to a 31-year low in double-quick time. Currency traders profited handsomely off the sterling’s decline and continued to short the currency throughout 2016. The same trends appear to be holding true for 2017. The GBP remains in the ‘Damaged Goods’ basket, and was the worst performing G10 currency in 2016.
From a trading perspective, it’s a bear maul for the GBP and this is likely to worsen in coming months. Fast-forward 5 months to November 8, 2016 and another geopolitical shock rocked the global economy. Donald J. Trump was elected president of the United States of America. In the lead up to the historic vote, economists, analysts and day traders were calling for doom and gloom if Trump were elected. However, in much the same fashion as the Brexit – stock markets rallied. We have seen unprecedented gains being made on Wall Street. The Dow Jones Industrial Average, the NASDAQ Composite Index, the S&P 500 Index, and the New York Stock Exchange are hitting their straps.
