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MTrading Team • 2023-11-10

EURUSD holds lower grounds amid mixed ECB talks, Fed rate hike concerns

EURUSD holds lower grounds amid mixed ECB talks, Fed rate hike concerns

The risk appetite appears dicey on early Friday as market players struggle with the hawkish Fed bets and receding geopolitical woes, as well as stimulus signals from China and Japan. Even so, the rush toward risk safety keeps the King Dollar on the bull’s radar, especially after Fed Chair Powell’s indirect signals for higher rates.

While the US Dollar appears all set to end the week on a positive side, Wall Street paused the winning streak and joined the Gaza fears to weigh on the riskier assets like commodities and Antipodeans. The same exerts downside pressure on the Gold price but the Crude oil recovers amid Saudi Arabia’s defense of the energy market.

With this, EURUSD, AUDUSD and NZDUSD edge lower while USDJPY adds to the weekly gains. Further, USDCAD prods a four-day uptrend while GBPUSD refreshes weekly low after downbeat UK GDP data.

On a different page, BTCUSD retreats from an 18-month high while ETHUSD also pares the biggest daily gains in a year with mild losses as traders await more updates on the Spot ETF filling and approvals.

Following are the latest moves of the key assets:

  • Brent oil recovers from 3.5-month low while posting mild gains near $81.10 by the press time.
  • Gold price retreats to $1,955 after bouncing off a five-week low the previous day.
  • USD Index defends the week-start recovery from a multi-week low around 105.90 as we write.
  • Wall Street closed negative and so the Asia-Pacific stocks edged lower. That said, equities in Europe and the UK begin the day with indecision.
  • BTCUSD and ETHUSD both retreat from multi-day highs to around $36,800 and $2,120 as we write.
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Fed’s Powell fuelled US Dollar…

Federal Reserve Chairman Jerome Powell’s hesitance to confirm the policy pivot renewed hawkish concerns about the US central banker’s next move and allowed the US Dollar to print the biggest daily gains of November. Additionally, a slight softening of the US Initial Jobless Claims also underpinned the Greenback strength, especially when other Fed policymakers joined Powell to renew hawkish hopes for the US central bank.

That said, Atlanta Fed President Raphael W. Bostic said, “We will remain restrictive until we're sure about 2% inflation.” On the same line, Federal Reserve Bank of Richmond President Thomas I. Barkin said that he has a hard time declaring 'sufficiently restrictive' at any point in time. Furthermore, the interim St Louis Fed President Kathleen O'Neill Paese also crossed wires by saying, “(It’s) Too soon to rule out further US rate hikes.”

Additionally, the policymakers’ comments about the US economic strength and geopolitical risks outside the nation, especially in China, Europe and the UK, also allowed the US Dollar to remain firmer. Firstly, Fed Chair Powell signaled that the US economy has been stronger than expected this year while Fed’s Barkin said, “US economy is 'remarkably healthy'”. Following that, the US Council of Economic Advisers Jared Bernstein mentioned that they’re we're looking at a pretty clear transition to steady and stable growth.

The market’s fears that Chinese banks are in urgent need of short-term funds and are paying high overnight rates, as high as 50% per Bloomberg, flagged the economic fears about China. The fears mounted after the state media quoted Pan Gongsheng, Governor of the People's Bank of China (PBoC) as closely watching debt risks in various sectors. However, an anonymous PBoC adviser said that the country can achieve slightly above its 5% GDP growth target and tried to placate the pessimism, which in turn test the US Dollar bulls.

The Chinese policymakers’ readiness to defend the economic growth allowed the Gold buyers to remain hopeful. Additionally, expectations of witnessing the Japanese Government’s 886 billion Yen fiscal injection via a second extra budget planned also allowed the XAUUSD to edge higher despite the firmer US Dollar. It should be noted that the European Central Bank (ECB) officials, namely Mario Centeno and Boris Vujčić, appeared indecisive about the future monetary policy and the bloc’s economic stand, which in turn also bolstered the USD’s demand.

  • Strong buy: USDCAD
  • Strong sell: ETHUSD, GBPUSD, Gold
  • Buy: USD Index, Nasdaq, USDJPY

ECB’s Lagarde, UoM Consumer Sentiment eyed

While the markets are jittery on early Friday, ECB’s Lagarde may try to defend the optimists and can allow the US Dollar bulls to take a breather. However, she has fewer catalysts to back her argument, which in turn will allow the US Dollar to edge higher, especially amid hawkish Fed signals and a likely uptick in the US consumer sentiment data.

May the trading luck be with you!