US Open Note - Stocks improve and dollar surges

King dollar comes on top as rate hike prospects grow

US stock futures are near their highs but are showing minor slack, more so the S&P and Dow Jones composites than the Nasdaq 100. Expectations of lift-off in rate hikes in 2022, once tapering ends, has aided the reserve currency.

The dollar index has shot back above the 96.00 mark, but USDJPY plunged past the 114.00 level and is currently around 113.80.

While unlikely, should job projections be around pre-pandemic levels close to the summer period, this could boost the narrative for normalisation, however with the virus persisting across the globe, some timelines of hikes remain optimistic.

UK spending shows no hard times, while Lagarde fails to aid euro

Dollar strength is somewhat exacerbating the pandemic and inflation woes, which are still playing a serious part in the UK and the eurozone. Dovish ECB President Largarde added additional blows to the euro after suggesting that tightening too soon is not the right course of action for the common currency despite the hardships the virus and inflation are causing. The euro has slipped slightly beneath the $1.1300 barrier even after October German PPI came in strong at 18.4% y/y. Elevated levels of infections are putting pressure on economic growth in the bloc, which looks to be at risk after Austria announced a national lockdown, while Germany and Greece will implement restrictions on the unvaccinated.

The pound found its feet around the $1.3400 hurdle and returned to $1.3447. Sterling still looks softer even after stronger than expected 0.8% m/m growth in October retail sales. Furthermore, the GfK Consumer Confidence Index increased to -14 in November from -17 in October, beating the expectations of -18. Consumers seem to be willing, despite elevated prices and shortages, to spend also ahead of Black Friday and Christmas. It is surprising that spending is elevated, also in virtual retail, given the current strains on households, from the termination of pandemic welfare support and inflation.

Canadian retail sales upbeat and oil becomes easier on the pocket

USDCAD surged to an intraday high around C$1.2650 and seems to be the best performing pair today up by 0.39%. The Canadian dollar, heavily correlated with oil, has weakened with the drop in crude prices and ahead of September’s retail sales.

Canadian retail sales in September came in at -0.2%, beating the estimation of -1.0%, signalling that retail sales improved slightly. The headline figure also improved to -0.6% from -1.6%.

On another note, Canadian housing prices also grew by 0.9% in November rising from 0.4% in October.

WTI oil futures have plunged to the $76.00 per barrel vicinity, amid reports of a potential coordinated reserve release by major oil-consuming nations. According to Reuters, the US asked China, India, Japan, and South Korea to aid in the release to bring prices down.

The antipodean currencies remain heavy with the aussie falling to 0.7235 and the kiwi flirting with the 0.7000 psychological mark. Gold is consolidating around the $1,862/oz level.

Coming up, FOMC Member’s Waller and Clarida are due to speak at 15:45 and 17:15 GMT respectively.

Tomorrow the US Treasury will publish its FX report to Congress.

Pinakabagong Balita

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Technical Analysis – USDCHF shows negative signs in the short-term

Inflation is driving up rate hike bets globally, so why does the dollar remain king?

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