The news of an Israel-Lebanon ceasefire and mixed US data sparks cautious optimism early Wednesday, putting pressure on US Dollar bulls ahead of key economic releases. However, the hawkish FOMC Minutes, concerns over global trade wars, and persistent geopolitical tensions continue to support haven demand for the US Dollar and Gold.
At the same time, the RBNZ’s rate cut, weak industrial profits in China, and sluggish inflation data from Australia challenge the recent rebounds in commodity-linked currencies, including the Australian, New Zealand, and Canadian Dollars.
On Tuesday, the Fed Minutes revealed that many participants cited uncertainty over the neutral rate, leading to slower-than-expected rate cuts. Meanwhile, US data showed weaker-than-expected figures, including the CB Consumer Confidence and Richmond Fed Manufacturing Index for November and slower growth in October's New Home Sales.
In other news, the G7's criticism of China's non-market policies and export control measures for critical minerals added to market concerns, further weighing on sentiment.
Amid these plays, the US Dollar Index (DXY) edges higher after reversing the week-start fall the previous day.
EURUSD and GBPUSD remain under pressure at multi-month lows, driven by concerns over slow economic recovery in Europe and the UK. The European Central Bank (ECB) and Bank of England (BoE) policymakers' resistance to aggressive rate cuts and dismissal of rate hike discussions also weigh on the Euro and British Pound. Meanwhile, USDJPY drops to a two-week low, falling for the third consecutive day, as speculation grows over potential Bank of Japan (BoJ) rate hikes, carry trade opportunities, and Japan's market intervention to defend the Yen.
AUDUSD remains under pressure at its lowest level since August, despite a brief bounce following Australia’s monthly inflation data, which came in at 2.1%, slightly below the 2.3% forecast but above the previous 2.1%. The Aussie Dollar’s weakness is likely linked to concerns over China’s economic struggles and fears about Australia’s inability to raise interest rates.
Meanwhile, USDCAD fluctuates near its highest level since April 2020, edging higher recently. This comes after Bank of Canada (BoC) Deputy Governor Rhys Mendes suggested that further rate cuts could be expected if the economy follows the current forecast. Additionally, softer crude oil prices, Canada's main export, have also contributed to the Loonie’s recent strength.
The Reserve Bank of New Zealand’s (RBNZ) 0.50% rate cut did not prevent NZDUSD from rebounding from its lowest level since early November 2023. This bounce is attributed to the central bank’s more favorable inflation, growth, and interest rate forecasts, alongside an optimistic outlook from RBNZ Governor Adrian Orr.
Market uncertainty, along with fears of a trade war and geopolitical tensions, particularly ahead of today’s key US data, supports a recovery in Gold prices. However, the strength of the US Dollar poses a challenge for XAUUSD bulls as they target the $2,710-15 resistance zone.
Crude Oil ended with little movement despite a surprise draw in private inventory data. This could be due to reports that OPEC+ nations are set to discuss delaying a planned output increase originally scheduled for January during their meeting this weekend. Additionally, concerns over China’s demand and mixed geopolitical tensions in the Middle East likely weighed on energy prices.
Optimism around Donald Trump’s victory in the US Presidential Elections has faded recently, particularly with month-end consolidation and light news flow. This has pushed Bitcoin (BTCUSD) toward its first weekly loss in five weeks, while Ethereum (ETHUSD) struggles to gain momentum, holding near its highest level in four months.
After a busy Tuesday and a strong start to the day, Wednesday is expected to stay lively, with a range of important US economic data shaping the calendar. Traders will also be eyeing potential momentum ahead of Thursday's Thanksgiving holiday.
Key releases include the US Core PCE Price Index for October, the Fed's preferred inflation gauge, along with Durable Goods Orders, Jobless Claims, Goods Trade Balance, Chicago PMI, and Pending Home Sales. Additionally, the German GfK Consumer Confidence Survey for December and the US Weekly EIA Crude Oil Stocks Change will add to the busy schedule.
The US Dollar is likely to remain strong if the data points to steady inflation, robust employment, and positive activity and housing numbers, exerting pressure on major currencies, Antipodeans, and Crude Oil. Gold, however, could hold its ground, eyeing resistance around $2,710-15, while USDJPY may slide towards the 200-SMA support at 151.90.
EURUSD and GBPUSD might test recent lows, while AUDUSD and NZDUSD could see further declines. USDCAD could continue climbing, particularly with softer Crude Oil prices ahead of the weekend’s OPEC+ talks.
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