FX arena remains calm
As the new week gets underway, the outlook for the dollar is slightly negative. Having initially climbed on Friday, the dollar index later declined from the 94.62 high and has since remained negative. The euro, which has remained heavy following last week’s unsuccessful drop below the $1.1525 level, is still moving near $1.1570 with weak momentum. On Friday, the pound challenged the support near $1.3410, where it was unable to break through. A clean break below would set up a test of the December 2020 low of $1.3135, which would be a significant step forward. Although dollar/yen has stayed stuck below 114.00 and the four-year high of 114.70, it should eventually join the dollar’s longer-term surge as interest rates in the United States are expected to rise. US stock futures are holding near the new highs that were posted in the previous session.
Last week, the case for a higher dollar was resoundingly made. The US economy continues to grow, but the rest of the world isn’t doing so well. There was also a big boost in fiscal stimulus on Friday, thanks in large part to the passage of the traditional infrastructure bill by Congress. The Federal Open Market Committee (FOMC) meeting is over and Fed speakers will spread the word this week. Clarida, Powell, Harker, Bowman, and Evans are among those who will speak today.
Since the FOMC decision, US rate hike expectations have decreased. Despite good US data all week, yields ended last week considerably lower. Yes, there was some Bank of England effect, but that shouldn’t affect the US rates outlook too significantly.
Oil back above $82
WTI crude oil futures rose above $82 a barrel on Monday as OPEC+ refused to increase supply in response to President Biden’s calls for higher output. State-owned Saudi Aramco raised its official selling price for Arab light crude to $2.7 a barrel in December, an increase of $1.4 from this month. Following the decision by the OPEC+ to maintain its agreed-upon production rise level until the end of the year, analysts forecast sustained undersupply in the oil market through the end of the year. Additionally, Vice President Biden stated on Saturday that the United States has “other instruments” to combat high oil costs.
In other markets, gold prices are declining after the jump above the $1,800/per ounce, failing to improve the positive picture.
