The US dollar has continued to appreciate as emerging market countries take immediate action after the Federal Reserve raised interest rates. Mexico raised interest rates to protect its currency while Argentina lifted currency controls, triggering a huge 25 per cent one-day drop in its Peso. China made its move before the Fed announcement, sending its Renminbi to its weakest level since 2011 versus the dollar. The Sterling vs US Dollar rate has now lost four per cent in two months, hitting an eight-month low with Sterling more vulnerable after David Cameron’s latest EU battle. The Bank of Japan caused a sharp move in the Yen overnight after ‘technically’ expanding Quantitative Easing slightly. The euro has lost two per cent versus the US dollar this week before Sunday’s important Spanish Elections. With the build-up to the event was dampened by Wednesday’s US rate hike, a surprise negative result could impact the euro.

Sterling

The pound fell to its weakest in eight months against the US dollar, moving deeper below the $1.5000 barrier – a level the Pound has traded under for only 41 days out of the past five years. The bearish sterling sentiment comes as UK Prime Minister David Cameron’s somewhat disappointing meeting with EU leaders underlines the major 2016 ‘Brexit’ risk.

Euro

The euro spiked by almost five per cent against the US dollar and recorded its biggest one-day gain against Sterling after the European Central Bank rate decision on December 03. However, since peaking around $1.1000 against the US dollar, the euro has lost over two per cent with the US interest rate hike helping to reverse earlier gains. The next important trading point for the euro will be Sunday’s Spanish Election results.

US dollar

The US dollar continues to gain against many of its trading rivals following Wednesday when Fed Chair Janet Yellen suggested the US could raise rates at least three to four more times in 2016 if inflation improves. The US dollar’s gains against sterling have been somewhat muted, but the GBP/USD did fall to its lowest in eight months.

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