US Open Note – Dollar gains notable ground; oil continues the rise  



Euro eases further after German elections

The current week begins with traders’ attention on the German election results, but it serves as a reminder that politics is in full swing this week.

The results of the German federal election showed that the centre-left SDP party won a small plurality, as expected. The government negotiations are expected to go until Christmas, according to some estimates. As a result, Merkel may keep her job as Chancellor for a few more months. The euro is diving and is searching for the next support level below $1.1700.

ECB’s President Lagarde mentioned they will not be tightening policy, even if inflation pressures rise, because they still see it as a fad.

The expectation is that the so-called baseline scenario to contain a gradual increase in APP purchases as they prepare for the post-PEPP transition next year.

Dollar/yen rises ahead of plenty Fed speakers

The dollar is starting the week on a strong note as interest rates in the US continue to rise. The US dollar index is moving up for the second consecutive day, while dollar/yen is approaching the 111.00 psychological mark. US futures are mixed today, as the S&P 500 and Nasdaq 100 are pointing to a negative open, while Dow Jones is pointing for a positive open. Sterling has held up nicely this week because of the Bank of England's hawkish posture last week, but the UK's mounting energy issue predicts significant underperformance.

The 10-year Treasury yield rose to 1.47% in the last week of this month, which is the highest for the last three months as investors digested prospects that the Fed would begin tightening monetary policy.

Fed speakers are in short supply now that the FOMC meeting is over. Today's speakers are Evans, Williams, and Brainard. All Fed officials are likely to keep pushing forward with the tapering plan to prepare markets for an official announcement at the FOMC meeting on November 2-3.

Oil advances to 2-month high

In other markets, oil prices are nearing a new almost two-month high of $75.30/per barrel as a result of supply disruptions and the spill-over effects of rising natural gas prices. The yellow metal is flattening around $1,750/per ounce, while commodity currencies are looking unchanged today.

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