Foreign exchange markets have grinded to a halt this morning, as trading winds down on 2015 in just a few hours. A little bit of volatility in commodities and equities has eluded the currencies this week. WTI crude touched an 11-year low on Wednesday, after a short lived bounce the previous day, and is poised to close out trading this afternoon down more than 35% this year. Equities here in the US fight to finish 2015 in positive territory while the book has already closed on various indices in Europe and Asia. Europe’s main indices closed 0.2% lower today but posted more than 7% in gains in 2015, boosted in large part by the ECB’s easy policy. As expected, trading was very limited overnight.
There were absolutely no top tier data releases during the overnight session. As some European and Asian markets have already closed up for the year, those remaining keyed in on an article from IMF Managing Director Christine Lagarde in German newspaper Handlesblatt. Ms. Lagarde, who’s piece was published early Wednesday, expressed doubt for global growth in 2016 and argued great uncertainty looms heading into the new year. Citing planned interest rate hikes in the US and a continued economic slowdown in China, Ms. Lagarde opined the IMF believes growth could be “uneven” next year. Ms. Lagarde also noted medium-term prospects have been hurt by ageing populations, low productivity and lingering effects from the global financial crisis.
Additionally, Ms. Lagarde expressed some concern for emerging markets companies that hold debt in dollars. With revenues in local currencies, earnings could slide in 2016 as the Federal Reserve started what is expected to be a series of rate hikes. Policy makers in those emerging nations will need to monitor more closely the acute foreign exchange risks their big corporates face before a rising dollar. Concerning developed economies, the IMF believes most will continue to rely on loose monetary policy over the next twelve months, with the exception being the USA and UK. A clearly thoughtful outlook from Ms. Lagarde caps off what was a very interesting year in global markets.
Looking ahead to the North American session, we get one final look at US weekly jobless claims this morning. The market is anticipating that 270,000 Americans filed first time unemployment claims for the week ending December 24th. A consistently strong number, we can expect little to no reaction as the dollar finishes 2015 strongly. The greenback has been steady this week but remains poised to close out 2015 on multi-year highs against the euro, pound and Canadian dollar. Against a more broad basket of currencies, the US dollar gained more than 9% in 2015. Concerning the Loonie, see-saw trading has defined the last few weeks of 2015, but does look to close dangerously low to its lowest level since 2004. As it has done for most of this year, oil’s most recent decline has weighed heavily on the Loonie. Looking out to 2016, it will be interesting to watch this correlation and how policy makers up north combat lingering weakness. With most closing up shop early this afternoon, we expect a very quiet session.
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