Crude falling!
Last week was extremely turbulent in financial markets as oil prices tumbled 12% to a 7-year low. Weak commodity prices spilled over into equities pushing the S&P 3.8% lower during the week. Investor anxiousness well measured by the VIX index rose 64% over the last five days. These investors seeking safety fled to defensive currencies such as the US dollar and the yen. The greenback is continuing its climb ahead of the Fed rate hike largely expected, Wednesday this week.
The People's Bank of China published late Friday on its website a comment suggesting that the Renminbi should be valued against a basket of currencies instead of solely the US dollar. The Chinese currency is fixed daily to the US dollar and can thereafter fluctuate within a tight range. The Yuan has largely followed the US dollar rally and consequently making its Chinese exports less competitive.
This week will be marked by the US Federal Reserve meeting where the first rate hike since 2006 is expected. The wording of the press release will be key to determine the pace of the tightening and how many hikes can be expected in 2016.
