XM does not provide services to residents of the United States of America.

US Open Note – Dollar climbs as prices and yields tick higher



Global inflation risks prevail, Canada delivers CPI data

The US economy appears to be recovering well in the last quarter of the year and subsequently, speculation about a fresh Fed Chairman being appointed seems to be fading in the horizon. Yesterday’s surprise surge in US retail sales by 1.7% m/m in October hints that consumption remains at elevated levels. However, these figures are nominal as rising price pressures persist.

The dollar index has touched 96.24, levels last seen in July 2020, but it has currently retracted a tad below the 96.00 mark. Rising yields and upbeat sentiment has managed to keep the greenback buoyant, while gold surprisingly has kept its haven appeal trading at the 1,862/oz level, somewhat acting as an inflation hedge as well.

That said, its likely pressure on the Fed to take a more aggressive approach with tapering will continue towards the end of the year as inflation risks linger.

The USDCHF pair is holding above the 0.9300 handle, eyeing the long-term restrictive trendline pulled from the April 2019 peak of 1.0235. The yen is consolidating around the 114.80 mark but should the dollar retain its strength, a jump above the 115.00 level does not look unlikely.

US building permits in October improved to 1.65 million versus the forecast of 1.63 million however, new housing starts disappointed coming in at 1.52 million, from expectations of 1.58 million.

Sterling resilience beats deteriorating euro

The euro rebounded above the $1.1300 handle after touching a 16-month low of $1.1254. The ECB is unlikely to remove accommodation in December as the bloc continues to lag other economies like the US and the UK, hindered by the scars from the pandemic. Inflation risks also prevail, while in its latest financial stability review, the ECB highlighted dangers from higher debt levels in the corporate and public sectors as well as from more risk-taking and borrowing.

Across the channel, while Northern Ireland issues with the EU continue to fester in the background, the UK delivered stronger headline inflation of 4.2% y/y as opposed to the estimate of 3.9%, while the core component came in at 3.4% compared to September’s 2.9% and expectations of 3.1%. Furthermore, raw material costs, PPI input, came in stronger at 1.4% as well as PPI output at 1.1% m/m.

Moreover, the September house price index yearly figure shot up to 11.8%, beating expectations and the August number of 10.2%. UK inflation is above the 2% target and market expectations of a rate hike in December stand at just below 60% after the BoE failed to raise rates last month. The pound picked up, ticking only slightly up to $1.3467 after the strong CPI and PPI data.

EURGBP fell back below the 0.8400 handle, touching a fresh 20-month low of 0.8383.

Canadian inflation disappoints, dollar strength governs

The loonie pushed higher to C$1.2592 after yearly inflation came in line at 4.7% and the headline monthly figure at 0.7%. The core common number was slightly weaker than expected but unchanged from September’s 1.8% figure. Dollar strength and yesterday comments from BoC Deputy Governor Schembri on concerns around remaining slack in the economy may have aided the move.

WTI oil futures are holding above the $80.00 per barrel mark on growing odds that the US may dip into the Strategic Petroleum Reserves and cooperate with China in a coordinated effort to help ease oil prices.

US Crude oil inventories will follow at 15:30 GMT

Then starting from 16:00 until 21:10 GMT there will be various FOMC Members speaking from Bowman, Daly, Waller, Evans, and Bostic

Latest News

Market Comment – Fed’s Waller fuels the dollar, yen intervention warnings intensify

G
U
U
N

Technical Analysis – AUDUSD gets bearish vibes

A

Technical Analysis – WTI oil futures in fierce battle with 50.0% Fibo

O

Technical Analysis – GER 40 index marks highs after highs

G

U

Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.

All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.

Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.

Risk Warning: Your capital is at risk. Leveraged products may not be suitable for everyone. Please consider our Risk Disclosure.