US Open Note – Stocks around highs, dollar flat, and gold’s resilience tested

Sentiment improves but focus remains on BOC, ECB, and US GDP figures

The dollar seems to be flat ahead of Thursday’s GDP figures, scheduled for 12:30 GMT. Even if the GDP figures disappoint, the damage could be largely short-lived because on the horizon is an FOMC meeting on November 3, expected to signal the start of tapering and possibly depict a clear tapering timeline. Moreover, an imminent huge infrastructure bill is on the cards, which the US Congress is working to pass. So, this fresh expected stimulus could boost growth and the dollar when it is approved and absorbed in the economy.

Additionally, the United States always has the option to count on its own oil reserves and in the current energy crisis, this could be a major advantage against its economic peers, especially if elevated energy prices drag on for longer than expected. Those being the Eurozone and China, which have been hit the hardest.

US house prices in August advanced 1.0% following a 1.4% gain in July, missing the forecast of 1.5% and logging the smallest rise over the last 15 months. The estimate from the S&P CoreLogic Case-Shiller signalled that growth in housing prices eased slightly from the previous month’s number of 20.1%, coming in at 19.7%.

The dollar index has dipped to 93.70, while the euro and the pound made slight headways above the $1.1600 and $1.3800 marks, respectively. The yen is consolidating beneath the 114.00 handle.

ECB to remain a dove; BoE expectations soften

The Eurozone continues to be hampered by supply constraints and the energy crisis, which overall is not aiding growth in the bloc. Energy-linked inflationary pressures are hurting the pockets of citizens and if this persists, the situation will remain dull as the winter months approach people’s doorsteps.

With the Eurozone lagging other economies, whether that has to do with China or the energy crisis countering any progress made in the pandemic, the question is, will ECB president Christine Lagarde in Thursday’s press conference signal the emergency tools will be extended beyond March 2022?

It’s likely the ECB will remain a dove, and wont act to withdraw its monetary aid prematurely, especially under the multiple constraints the bloc is tackling, which inevitably will not aid the common currency.

Expectations of tightening from the BoE next week have abated somewhat. Nonetheless, an interest rate hike for the December 16 meeting remains fully priced in.

Commodities, BoC, and upcoming Australian inflation

Gold has failed to hold above the $1,800/oz border despite dollar weakness and upbeat market sentiment with US stock futures around their highs.

The aussie is remaining buoyant around the $0.7516 mark ahead of its inflation data, which is due to be released around 00:30 GMT. It seems that the country’s recovery setback due to the coronavirus may be temporary, as current market conditions are keeping the aussie on an upwards trajectory ahead of the RBA’s next meeting on November 2.

The Canadian dollar seems primed to retain its recent strength as the Canadian economy is booming. Currently, the USD/CAD pair is at C$1.2350 and should oil prices continue their ascent, the pair may maintain its downward trajectory. The country’s strong labour sector is also aiding inflationary pressures.

Continued tapering until the end of the year and a possible fine-tuning of the interest rate policy remains the narrative of investor’s expectations, which is due to be answered in tomorrow’s BoC decision at 14:00 GMT. Overall, elevated oil prices and an unexpected aggressive rate approach could be a further positive for the Canadian dollar.

The US consumer confidence and the Richmond manufacturing index figures are scheduled at 14:00 GMT, along with the numbers for sales of new homes.

Later, at 21:45 GMT, New Zealand’s trade balance is due, followed by its business confidence at midnight (00:00 GMT).

Then at 00:30 GMT, Australia’s inflation data will be announced.

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