Initial jobless claims come out; dollar still falling

US jobless claims declined by one thousand in the week ending November 13th, a new pandemic low as the labor market continues to slowly recover from the coronavirus hit.

The US dollar index is continuing the selling interest that started on Thursday, flirting with 95.60. Dollar/yen is hovering above 114.00 after posting a new high yesterday. Euro/dollar is jumping above the 16-month low of 1.1263, recouping some losses, while pound/dollar is approaching 1.3500. US stock futures are heading for a marginal positive open today.

Contrary to the expectations, the Fed forecast has remained constant. The swaps market expects a 50 bp tightening over the next year and hasn't strayed substantially from this forecast. The Fed is in a good position to start tapering this week, as it can delay rate hikes until after the mid-term elections. With a pandemic and damaged supply lines, other central banks may be overreacting or rushing to judgment.

Stock earnings still on cards

Macy's posted earnings and sales that beat analysts' estimates on Thursday, boosting its full year forecast ahead of the holidays. Macy's stock rose almost 8% in premarket trading, while the Chinese e-commerce behemoth JD.com announced a 25% increase in third-quarter revenue, citing "increasing consumer mindshare" as a contributing factor.

Euro awaits next policy meeting

Markets are now responding to the European Central Bank's dovish stance. The swaps market is now pricing in only 7 basis points of tightening over the next twelve months, far less than the 20-25 basis points that were factored in following the ECB's October 28 decision. Lagarde and most of her colleagues have been emphasizing the improbability of a rate rise in 2022, and we concur. The ECB's December 16 meeting should see an extension of QE, given that the dangers of eliminating accommodation have increased dramatically.

Turkish lira is the worst performing currency of the day

The Turkish Central Bank dropped its one-week repo auction rate by 100bps to 15% in November, following 200bps cuts in October and September. The move came after Turkish President Erdogan pledged to push for lower rates, despite the country's inflation hovering over 20%, considerably beyond the bank's mid-point objective of 5%, and the lira falling nearly 11% in November. The biggest loser in the last days is the Turkish lira, which is still plunging to record lows of 11.2130 versus the dollar.

Kiwi rises after RBNZ’s business survey

The New Zealand currency rose roughly 0.6% today as the RBNZ's quarterly business survey showed firms' inflation expectations have risen considerably. The aussie is finding strong support at the short-term ascending trend line around $0.7250 and loonie is flattening near $1.2600.

In other markets, oil is moving up after printing a new six-week low today, while gold prices are failing to surpass beyond $1,870/per ounce.