US dollar slopes upwards amid upcoming monetary tightening
The dollar’s upsurge seems to be continuing this week fueled by the Fed’s Vice Chair Richard Clarida, who signaled an imminent acceleration of the tapering program that could eventually result in earlier rate hikes. In addition, the greenback has also benefited from the rebound in Treasury yields today. However, President Biden is expected to reveal his nomination for the Fed’s chair before Thanksgiving on Thursday, where a possible designation of the more ‘dovish’ Brainard might push back projections for a faster rate hike timeline.
The British pound appears to be losing traction today following the BoE’s Governor Andrew Bailey comment on the weekend that inflation issues mostly stem from the supply side, thus tighter monetary policy would not cause any good in the economy. Furthermore, the ongoing tensions between the UK and EU regarding the Northern Ireland protocol are causing further deterioration in the pound’s outlook.
The euro continues to struggle as Lagarde’s comment that the ECB will not proceed with monetary tightening in 2022 combined with the new round of COVID-19 lockdowns that are spreading among an increasing number of European countries, undermine the currency’s prospects.
The New Zealand dollar is trading marginally higher today ahead of the Reserve Bank of New Zealand meeting on Wednesday. This event is of particular interest as the markets have fully priced in a 25 basis points rate hike, but soaring inflation and the latest stronger-than-expected employment report have ignited speculation for a 50 bps increase.
US stock markets rebound after mixed close on Friday
Wall Street is set to open higher in the shortened trading week due to Thanksgiving, despite the rising concerns over the resurgence of Covid-19. Specifically, Nasdaq futures are trading 0.6% higher in the pre-market trade, while S&P500 and Dow Jones futures are gaining 0.3%.
Oil and gold struggle
Oil is losing ground in the current session as rising Covid-19 cases in Europe and a potential release of Japanese oil reserves have cast shadows over both supply and demand sides. Additionally, gold is in the red today, heavily pressured by the stronger dollar.
Flash PMI reports and FOMC minutes on the weekly menu
The November flash PMI readings for several countries are due on Tuesday and will most probably point to slowing economic activity amid soaring inflation, long-lasting supply bottlenecks and the Covid-19 outbreak in Europe. Also, the FOMC minutes will be released on Wednesday and will be closely eyed as markets expect to gain insights on a possible acceleration of the Fed’s rate hike timeline. Wednesday will also feature a barrage of economic data out of the US, which will be released ahead of the Thanksgiving holidays.