Unlike the last month, we’ve experienced an active and fluctuating process during the month of March in 2017. So, we finished the first quarter of 2017 and the global markets are pricing a lot of different risk factors with the beginning of the year. When we look at the general perspective of March, there is some important break even points for the global economies. The first and the most important one was the Fed’s interest increase decision in FOMC meeting at 15th March. On the other hand, the elections in the Netherlands and different central bank decisions about monetary policies of the countries were the other important points of March.
First of all, we will start with the Fed decision. According to the experts in the global forex market, the expectation was an increase by 25 basis points at the middle of March and there may be two more interest increases during the year. The FOMC, which did not surprise the market at the meeting, raised its benchmark interest rates by 25 basis points to 0.75 - 1.00 %. However, this possibility has been pricing in the global economies for a long time. So, we can say there is no surprise for the traders about the interest increase decision. In addition, the Dollar index lost value with the expectation that interest rates will increase three times in 2017. On the other hand, FED President Janet Yellen's statements were also optimistic about the general economic outlook of the world. Yellen, however, said the bank would gradually increase interest rates even if the rate of inflation increases.
As a different perspective to the FOMC meeting which held on 15th March. We can say that the Fed members continue to be cautious about the Trump policies. Therefore, the disclosures of members may continue to stay away from clarity for a while. We can say that the Fed decision creates a positive atmosphere for developing country currencies. Nearly all of the investors were expecting an interest rate increase of 25 basis points, along with Fed officials, including Fed Chairman Janet Yellen, who sent out unusually clear signals. After the FOMC meeting and declaring the interest increase decision, Fed Chairman Janet Yellen held a press conference. Yellen said the economic outlook is positive for the global economies. The Fed Chairman noted that the Fed's inflation target is "symmetrical" and that it would not be a problem to overcome the target slightly. Yellen stated that this year's three interest rate increases should be considered as a gradual increase. Yellen explained that core inflation has not changed much less than 2 % in the past few months, but it is expected to increase, while keeping in mind that inflation will gain around 2 per cent of the target in the coming years. Inflation is gradually approaching its 2 % target. The Fed Chairman also said that the 2 % inflation target is not an upper limit.
Yellen argued that it is more important to understand that the economic targets are being approached gradually, and that it is more appropriate for the Fed to gradually increase interest rates than to take a neutral stance. Yellen thinks it would be easier to use the federal funding rate as the main active means. After the Fed's decision on interest rates and Yellen's disclosures, the futures market price rates only one more interest rate increase this year. The number of interest increase by Fed during this year will be the main point of determining the future of developing markets from different countries all around the world under today’s economic outlook. There are two different expectations about this issue like two or three times interest increase during the year. As a general expectation, the developing economies are pricing two interest increase totally during the year. According to the financial experts, if there are three different interest increase decisions by Fed during 2017, it can be a bit risky for the developing economies.
Rutte wins the elections in the Netherlands
After the first results of general elections in the Netherlands, Dutch Prime Minister Rutte's party VVD won the elections. While the Christian Democratic Party (CDA), which issued 25 deputies, followed the PVV, the party could be the third party. The most striking point in the elections was that the participation rate was realized at high levels. At this point, it is possible to say that the Dutch people have moved away from the far right. Especially before the upcoming French elections, this result can be evaluated positively for the EU. Increasing racism and nationalism in different countries of Europea is a kind of risk factor for the economies. So, the results of the election of the Netherlands will be a bit relaxing for the European economies. After the results of elections, the EUR/USD parity reached the 1.07 level on the market which is the highest point of last two months. We can say the positive atmosphere on Euro can continue for a while because of optimistic election atmosphere in the European side.
The Bank of Japan did not change the benchmark interest rate
After the Fed’s interest increase decision, the Bank of Japan didn’t change its monetary policy. Thus, the policy differentiation between the two central banks increased a bit more. With the slow recovery of economy and bond rates being under control, the BOJ has remained inactive for the time being. However, with Fed's rate hike pushing up interest rates globally, some economists think that the BOJ may be able to signal signs that if inflation starts to rise in Japan, it could raise interest targets. We can say the Bank of Japan stayed the waiting position against the global developments in different markets of the world like America and Euro zone at the last times. Also, the calendar of Asian economies will be a bit more clear than the other economies in the world.
The Future of Bitcoin
Nowadays, when we come at the end of March, we’ve found an opportunity to evaluate the future of Bitcoin market with some professionals from the global forex market. On the other hand, China has imposed regulations on the regulations of the central bank's stock exchange regulations and has ordered the crypto processes to be stopped until the regulations are done. They explained that they had completed the regulations of the stock exchange in the past days and that they predicted that they would start withdrawing money again within a week. These two stock exchanges, OKCoin and Huobi have decided to delay this period a little longer.
At the last times, many ATM’s started to open in different cities of the world like St.Petersburg, Russia. Looking at the past year, it can be seen that the number of Bitcoin ATMs has risen seriously. According to the official sources, there are more than one thousand ATM’s in the world. When we look at the distribution around the world, the crowded crowd bumps. For example, 65 % of ATMs are located within the US borders. Canada ranks second on the bitcoin ATM list, while the UK is third.
With the beginning of 2017, although there are a lot of conflicts in China about the Bitcoin concept, the Bitcoin prices started to increase strongly. You will remember the transactions of Bitcoin were suspended by the Chinese government. The 30-day suspension period has now been postponed for an unlimited period. Chinese stock exchanges continue to negotiate with authorities for appropriate policy standards.
The Bitcoin price managed to stay over 1000 USD and reached the highest value of all time at the first week of February. In addition, the increasing trend has continued until the end of March and the Bitcoin price reached to 1291 USD level at March 3rd which was the highest level of history. We can say the date of March 11th was so critical for the Bitcoin market. The US Securities and Exchange Commission did not accept the application made by the virtual currency Bitcoin to become an Exchange Traded Fund. According to a written statement from the SEC, Bitcoin's Exchange Traded Fund application was rejected on grounds that it did not meet the requirements for the prevention of fraudulent and manipulative activities. After the decision, the prices decreased under the 1125 USD level in the same day. Bitcoin currently trades at 1150 USD in international stock markets. This shows that the SEC's decision has an immediate effect on the markets but not much effect. Moreover, the expectation of the SEC decision to be long pressured the cryptographic money markets, and since this decision is negative, we will be very close to seeing transactions at the 1200 USD level again.
The gold market has experienced a fluctuated period really during the month of March. The starting was level at 1244 USD level at the beginning of the month. When we look at the first half of March for Gold market, we can observe a negative process. The market had focused on the Fed interest increase decision. At 15th March, Fed announced that they’ve made an interest increase by 25 basis points. After the decision, the Gold market affected so positively by the developments. And, it started to earn value quickly. The starting level was at 1199 USD level at the beginning of 15th March, but after interest increase decision, the parity showed a strong positive trend and reached to 1225 USD level at 16th March.
The general dot plot, which shows the expectation of the US central bank for the rate of future interest rate increases, showed that policy makers are expecting two more interest rates this year. US Treasury yields of 10-year maturity fell below 2.5 %. The Bank of Japan (BOJ) has not changed its policy of interest and return currencies at its meeting on 16th March.
Gold was among the highest rising metals following the Fed's conservative views on three interest rate hikes. While US recession at 10-year rates is among the other factors that support gold, watching the positive data stream in the US may put the strain on the main resistance. For a while, we can observe a bit positive trend in the gold market in the first weeks of April in this year.
As a general outlook, the silver market has experienced a negative process during the month of March. Especially, in the first half of the month, the parity had a strong negative trend. The starting point was at 18.33 USD level at the beginning of March for the silver market. Then, the parity started to lose value. When we come to 15th March, the silver market tested the lowest level during the month. The parity decreased to 16.86 USD level which was the lowest level of last three months in the silver market. However, after beginning the second part of March, we have started to observe a strong recovery process. The parity reached to 17.48 USD level at 16th March. The main reason for the strong increase was the Fed decision.
First of all, we want to start with the concept of crude oil in the global forex market. The starting point was at 54.05 USD level at March 1. As a general perspective, there was a negative trend in the crude oil market during the March. At March 14th, the parity tested under the 47 USD level which was the lowest price of last 5 months. With the beginning of second half of March, we started to observe a strong recovery process because of Fed’s interest increase decision in the crude oil market. The traders started to prefer crude oil for making investment again with the second half of March.
On the other hand, when we look at the Brent oil futures, we can observe the beginning point was at the 56.60 USD level at March 1st. Like crude oil market, the brent oil prices tested under the 50.30 USD level again after for a long time. With the beginning of second half of March, we started to observe a strong recovery process because of Fed’s interest increase decision in the brent oil market. The parity reached 52.00 USD level on March 16th.
Oil prices rose after oil inventories fell unexpectedly in the US in the past week, following official release in the US, following the first fall of this year. According to the weekly crude oil inventory data released by the Energy Information Administration, oil stocks recorded a decrease of 237,000 barrels per week. However, when we look at the details of the data, an increase of 21,000 points in the production wing. The decline in inventories, particularly in crude oil, supported limited increases in oil prices. Technically, when we analyze Brent and Crude oil price, they keep its course on the bullish trend.
Natural Gas Market
Finally, we will mention about the global natural gas market briefly. The positive trend has continued during the month of March. The starting price was at 2.772 USD level at the beginning of March. At March 13th, the natural gas price reached to 3.075 USD level which was the highest level of the month. When we look at the natural gas market after announcing the Fed decision in the second half of the month, we can see there are no strong movements caused by Fed decision. If we talk about the north hemisphere of the world, the next season will be summer, so we can observe a bit horizontal process on the natural gas prices during the next months.
The EUR/USD parity has experienced a positive trend during the March 2017. At the beginning of the month, the starting level was at the 1.0556 level on the global forex market. When we observe the parity at March 15th, the starting level was at 1.0612 and after Fed’s decision, we could see a strong positive movement. The parity reached to 1.0736 level which was the highest level of last two months. The Fed, which wants the interest on the market, could not satisfy the market in terms of the interest rate increment. The fact that the dollar index is still moving around 100.50 after the Fed meeting supports the upside of the parity. Since December, although the economic outlook has not changed much, Fed members have signaled that the interest rate increase in the market is close to their spoken direction. For this reason, we have not seen much change in the Fed forecast. Another factor that posed a downside risk in the election was the Dutch elections.
After Rutte’s victory in the elections of the Netherlands on March 15th, the parity showed a strong increase. According to many specialists in the global forex market, the election was the main reason for increasing the value of EUR/USD parity with the beginning of second half of March.
We’ve observed a very fluctuating trend in GBP/USD parity in the month of March. The starting level was at 1.2372 level for the parity at the beginning of the month. After starting March, the parity lived a very negative process and reached 1.2142 level on March 14th. When we look at the second half of March, the parity started to show a recovery signal. After the Brexit vote, an inflationary pressure has appeared under the depreciation of the GBP. This leads to a situation in which inflation rises above the targets of fast rising inflation. In addition, growth has not yet slowed down yet, but it seems likely that the Brexit calendar will become operative and create a downside risk through reduced direct investments and lost employment.
Like other major parities in the global forex market, the USD/JPY parity experienced a fluctuating process during the month of March. The starting point was at 113.20 level for the parity at the first day of March. Until the second part of month, the parity showed a strong positive trend and reached 115.34 level which was the highest point of last 30 days. After hearing the Fed decision, which caused a strong negative trend in Dollar side in the global economy, the parity decreased to 113 level again after a strong trend in March 16th.
Following the Fed, the interest rate decision of the Central Bank of Japan was followed. As expected, there was no move from the BoJ. Then, in his speech that the president of BoJ Kuroda said, the Japanese economy has continued to recover moderately as a trend. In the first transaction day after the decision, it can not be said that the statements from the BoJ created very hard moves on pricing. When we look at the Asian side, the weaker trend started to be observed after seeing the Fed and BoJ decision.
- Date: 30 March 2017 Thu 18:18
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