The risk appetite again deteriorated on early Tuesday, after a slightly positive start to the week, as hawkish Fed bets regained the market’s attention. Adding to the sour sentiment are the fresh fears about China’s economic health amid mixed data and the policymakers’ defense of the current demand-driven growth tactics to avoid recession. Furthermore, the ongoing war in Gaza and the looming humanitarian ceasefire offer mixed feelings to the traders and push them toward traditional havens like the US Dollar.
While the US Dollar recovers from the seven-month low, the commodities and Antipodeans pare the previous weekly gains, especially amid less interesting findings elsewhere. With this, the Gold Price extended the week-start retreat and the crude oil drop to the fresh low in more than a month. That said, Brent Oil drops to the lowest level in a month while WTI crude oil prints a two-month low, declining by the press time, amid economic fears and mixed geopolitics.
AUDUSD appears the biggest loser among the G10 currency pairs despite the Reserve Bank of Australia’s (RBA) rate hike while USDCHF occupies the other end due to the Swiss Franc’s (CHF) haven status. Further, mostly downbeat concerns about the UK and Europe failed to defend the hawkish comments from the Bank of England (BoE) and the European Central Bank (ECB) officials.
Elsewhere, BTCUSD and ETHUSD bulls take a breather as crypto traders await spot ETF approvals from the US SEC and appear optimistic about Ripple’s $20.00 million lawsuit victory.
Following are the latest moves of the key assets:
US Dollar Index (DXY) extends Monday’s rebound from the lowest level in seven weeks to 105.50 on receding fears of the Fed’s policy pivot, as well as amid expectations of witnessing firmer US economic performance, not to forget the improving US-China ties that can help Washington gain the power.
Starting with the Fed talks, Federal Reserve Governor Lisa Cook pushed back hopes for a change in the current monetary policy by saying that she hopes the current policy is enough to return inflation to 2%. The policymaker also added that the expectations of near-term policy rates do not appear to be driving long end. On the same line, Minneapolis Federal Reserve Bank President Neel Kashkari said to the Wall Street Journal (WSJ) that he's not convinced FOMC rate hikes are over. Fed’s Kashkari also added that the US central bank has more work to do to get inflation under control.
On Monday, US President Joe Biden’s key economic adviser and the ex-Fed Vice Chair Lael Brainard mentioned that the economy performing exceptionally well. Further, US Treasury Secretary Janet Yellen will meet with Chinese Vice Premier He Lifeng in San Francisco this week and will try to strengthen the Sino-American ties ahead of a US-hosted summit of Pacific Rim leaders.
In the case of China, the headline Trade Balance deteriorated to $56.53 billion for October versus $77.71 billion reported in September and $81.95 billion market forecasts. Details suggest that the Imports grew 3.0% YoY, rising from -6.2% prior, but the Exports slumped to -6.4% yearly figure compared to -6.2% previous readings. It should be observed that the Chinese state media stated on Monday that youth employment is generally stable and continues to improve in the nation. Additionally, People’s Bank of China (PBoC) Deputy Governor Zhang Qingsong mentioned that he is not too worried about the Chinese economy while also adding, “Overall debt level of the Chinese government is in the mid to lower range by international standards.”
On Monday, EU Sentix Investor Confidence improved to -18.6 for November versus -21.9 prior while German Factory Orders for September came in better than forecast of -1.0%, to 0.2% from 3.9% previous readouts.
Following the data, Austrian central bank Governor and the European Central Bank (ECB) Robert Holzmann said that he belongs to those who think we should be ready to hike again if needed.
Elsewhere, the Bank of England (BoE) Chief Economist Huw Pill repeated his comments suggesting the UK inflation remains too high while adding, “Sees more signs of slowing activity.” That said, the British Retail Consortium (BRC) like-for-like retail sales for October grew 2.6% YoY versus 2.4% expected and 2.8% prior readings.
On early Tuesday, the Reserve Bank of Australia (RBA) matches expectations of announcing a 0.25% rate hike by lifting the benchmark rate to 4.35% from 4.10%.
Having witnessed a slew of data from the Asia-Pacific zone, Tuesday’s economic calendar appears less interesting as the second-tier central bankers from the US, Canada and Europe are up for speeches. Also important will be the US and Canadian trade balance data and the weekly crude oil inventory from the Industry source, namely the American Petroleum Institute (API).
May the trading luck be with you!