Towards the end of Q1 and the start of Q2 there has been significant changes in the plans of Central Banks, leading to high volatility in a range of markets.
US The Fed, not convinced by the ongoing economic performances of the US, opted for a more dovish approach on the interest rates, diminishing the plan to raise them from four times to two in 2016. This delay in the hike of interest rate in the United States led to a significant drop in the value of the Dollar against the major currencies.
YEN In the meanwhile, Japan is facing problems as its currencies is appreciating without signs of a reversal despite the numerous monetary policies applied by the BoJ, reaching a 17-months high earlier on April.
OIL Oil prices played an important part lately, as after a vertiginous drop that led the price of crude oil fall until 27$ per barrel, has experienced a rally, reaching the 44$ per barrel. Recently, fears for another drop in oil prices from an oversupply has been related to the reluctant behaviour to freeze production by countries such as Iran, which lately referred the production freeze by Saudi Arabia as a “joke”, media say. However, the agreement between Saudi Arabia and Russia on oil production has been taken by the market as a strong bull signal, supporting again the ongoing bounce of oil prices. Important news for the future prices will be released after the OPEC meeting on Sunday the 17th of April, defined by Price Futures Group’s analyst Phil Flynn as a “historic turning point for the market”. Such a really had positive effect on the currencies highly correlated with energy prices, CAD AUD and NZD in particular.
EUROPE Negative interest rates and Brexit gave the Euro a high volatility period. The uncertainty over the UK also has an effect on the Euro.
PANAMA LEAKS The Panama Papers are an unprecedented leak of 11.5m files from the database of the world’s fourth biggest offshore law firm, Mossack Fonseca. Lots of politicians and famous important people have been linked to this files and now investigated under the accuse of tax evasion. Such important names are Vladimir Putin, David Cameron’s and sportive people such as the footballer Leo Messi.
CHINA Measures adopted to face the recent crisis seems to be effective at least in the short term, contracting the growth of the economy of 0,1% under the expectations of 6,8% growth.
Written by Riccardo Lovo, University of Nottingham Economics Student.