Investing.com - Here are the top five things you need to know in financial markets on Tuesday, December 20:
1. Dollar bounces back towards 14-year high
The dollar was bouncing back toward its 14-year high against a basket of major currencies on Tuesday with markets focused on the possibility of further U.S. interest rate hikes next year.
The dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was up 0.25% at 103.33 by 6:00AM ET (11:00GMT), coming within sight of its 14-year peak of 103.55 touched last week.
Optimistic remarks on the U.S. labor market by Federal Reserve Chair Janet Yellen strengthened the possibility of further rate hikes next year.
Speaking at the University of Baltimore’s midyear commencement ceremony Monday, Yellen said recent improvements in the economy have created one of the strongest job markets in years for graduates.
The speech came a few days after the U.S. central bank hiked interest rates for the first time in a year and projected three more increases in 2017, up from the two projected in September.
2. Yen slumps towards 10-month low after BOJ
The dollar climbed 0.8% to 118.06 against the yen, as fresh buying emerged after the Bank of Japan kept monetary policy unchanged at its final meeting of the year on Tuesday.
The BOJ affirmed its twin targets of minus 0.10% interest on some excess reserves and the 0.0% 10-year government bond yield. The central bank also raised its assessment of the economy for the first time since May 2015, noting that “exports have picked up.”
3. Euro falls near 2003 low
The euro slipped 0.2% to 1.0381 against the dollar, edging near last week's low of 1.0365, its weakest level since January 2003, in the wake of two separate deadly incidents in Turkey and Germany.
The Russian ambassador to Turkey, Andrei Karlov, was shot and killed at an art gallery in the Turkish capital of Ankara Monday evening.
A few hours later, a truck plowed into a crowded Christmas market in central Berlin, killing 12 people and injuring up to 50 others in what Germany officials said looked like a terror attack.
4. Global stock markets push higher as holiday season approaches
U.S. stock markets pointed to modest gains at the open on Tuesday morning, with the Dow inching closer to the 20,000 mark in pre-holiday trade ahead of a slew of earnings.
Darden Restaurants (NYSE:DRI), General Mills (NYSE:GIS) and Blackberry (TO:BB) are all set to report before the bell. FedEx (NYSE:FDX) and Nike (NYSE:NKE) are due to report after the bell.
There are no major U.S. economic data releases scheduled for Tuesday.
Meanwhile, European stocks moved mostly higher in mid-morning trade, with Italian banks among the biggest gainers after news the country’s government is preparing a potential €20 billion rescue package for struggling lenders.
In Asia, the Shanghai Composite in China closed 0.5% lower, while the Nikkei in Japan closed 0.5% higher.
5. Oil edges higher amidst low volume trade
Oil prices held below 17-month highs on Tuesday, as traders awaited further clarity on whether major crude producers will stick to their promise to pull back on output.
Brent tacked on 30 cents, or 0.55%, to $55.22 a barrel, not far from a 17-month high of $57.89 touched last week.
U.S. crude was up 10 cents, or 0.2%, to $53.16, within sight of a one-and-a-half-year peak of $54.51 logged on December 12.
OPEC members agreed to reduce output by a combined 1.2 million barrels per day starting from January 1, their first such deal since 2008.
The pact was followed by an agreement from 11 non-OPEC producers, led by Russia, to cut their supplies by 558,000 barrels a day.
However, some traders remain skeptical that the planned cuts will be as substantial as the market currently expects.