In 2016 markets were largely driven by political events, particularly political surprises, and currency forecasts were all too often proven to be wrong.
The US repeated last year’s action of an interest rate hike in the last month of the year and, once again, hinted at a series of increases for the following year. It will be interesting to see how many of these will actually transpire as we only saw the one out of the expected four interest rate hikes in 2016.
Sterling dropped by as much as 20% against the dollar and euro during the year and finished the year down about 15%. Political uncertainty continues to weigh on the currency.
The European nations are keeping a very close eye on the situation in the UK as they’re entering into a year of major elections in key economies Germany, France and the Netherlands. In 2016 the ECB extended its quantitative easing programme to try and stimulate growth and inflation but it remains to be seen whether the measures will have the intended effect.