AvaTrade - Analytics

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    Commodity prices are dominating the equity markets

    Traders are completely focused on commodities which are plugging sharply. The recent rout in the gold price has many investors sell their stake in shining metal and the Gold ETF has experienced a colossal outflow once again. Gold miners are under enormous pressure and this is dragging the markets lower mainly. However, it wasn’t only gold, which fell below 1100 for the very first time since 2010, but crude oil also fell below the 50 dollar level for the first time since April.

    The bigger question for many investors is that how the Fed can remain confident in raising the interest rate, which Miss Yellen has said a few times already that a rate is coming this year. She certainly feels courageous in her approach despite the fact that the Fed still has inflation as one of their main mandate. Provided that the commodity prices are falling like a stone from a cliff, it is arduous to think how this not going to play its part in inflation. Surely, falling commodity prices will give birth to disinflation and that will become a headache for the Fed and they will have to rethink about their timing of raising the interest rate.

    Back in Europe, Greece remains cash strapped once again after receiving the payment of 7.1 billion from the EFSM fund, which was used to pay the ECB’s interest and principal payment along with an IMF bill of 1.6 billion euros. The Greek banks opened yesterday after a long time and capital control remain in place, however, the daily withdrawal limit has been raised to 420 euros. This limit will remain in place for some time and there is no time limit for this. As for the UK, the government borrowing took a nose dive after the income tax and VAT receipts helped the government to raise more funds.


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