Not surprisingly, the US Fed moved to hike interest rates last week, but the markets were somewhat surprised by the hint of three possible rate hikes in 2017.
We are not sure if the signals being thrown by Treasuries this week are a sign of a longer term change or if we are “putting the cart before the horse.”
A strengthening US dollar and uncertainties in global stock markets have helped to drive some commodity markets lower over the past few weeks, and the possible appearance of a double top in crude oil has many macro-fund traders getting concerned about the outlook ahead.
We were a little surprised with the trading action over the last week.
While the markets might not believe that the oil producers’ deal to reduce output will be fulfilled, it does appear that US crude oil inventories are tightening and global demand is creeping higher.
What we don’t know is the pace of the global recovery, but what we might know is that there is some measure of forward progress in the US, Europe and China.
Evidence over the last month suggests to us that the BREXIT has not had as negative an impact as was expected.
Recent talk of fresh easing from the BOJ and BOE seems to have been largely discounted as ineffective, and that has prompted a revival of safe haven interest in gold and US Treasuries.
The “unexpected” happened with the UK referendum to leave the EU.
Since the March lows, several physical commodities have forged rallies that few expected, and with even fewer anticipating the magnitude of those rallies.