The third quarter has drawn to a close with remarkable levels of inactivity despite an abundance of trends from key benchmarks. In the capital markets, the S&P 500 charged to a record high on an eighth consecutive quarter climb while the VIX volatility index slid back below 10. Other, global equity indexes may not have enjoyed the same degree of productivity, but they were broadly higher. Meanwhile, in the FX market, the Dollar slid to two-and-a-half year lows while the Euro soared to equivalent highs. What motivated these moves matters profoundly for trends heading into the final quarter of the trading year.
Heading into the fourth and final quarter of 2017, speculative appetite and a shift in global monetary policy will continue to determine the bearing and activity level of the financial system. The Federal Reserve has revitalized rate expectations; but the Bank of England’s and Bank of Canada’s policy forecasts carry more hawkish expectations. As for speculative reach, exposure is at unprecedented levels both for both key measures like US equity indexes and through nascent rate forecasts for major currencies. How long can these trends hold out and how much more buoyancy can they provide? What happens if volatility returns through these final months of 2017? See the DailyFX Analyst’s fourth quarter forecasts for key currencies, equities and commodities through year end.
The Dollar has suffered through 2017. The first three quarters of the year saw the individual currency drop as much as 13 percent. While there is fundamental weight to this move, have bearish interests overshot?
In general, economic data should continue to reign supreme as the top influence on the Euro during Q4’17. Coupled with doubts over the timing of the ECB stimulus
From an economic viewpoint, the British Pound should continue to benefit from the prospect of higher UK interest rates but the technical forecast does not look as rosy as the fundamental picture.
A surge in the price of Crude Oil toward the end of Q3 2017 aligned with a fundamental shift that favored higher demand alongside OPEC’s continued production curbing.
The Japanese Yen is set to suffer through the fourth quarter, assuming global risk appetite stands up, as interest-rate differentials hold the currency-market reins tight.
Gold prices may exhibit a more bullish behavior over the remainder of the year as Federal Reserve officials adopt a less-hawkish tone.
Global stock market indexes appear to be well-supported and poised to finish the fourth quarter higher than they started it, but fundamental and technical considerations call for caution.