The U.S. Dollar swung back to gains overnight as equity markets cooled off based on the fear that gradual central bank tightening will soon get in the way of very high valuations that have marked records.
Overview
The COVID news and warnings out of Europe are making traders wonder if there is indeed a chance of a slowdown down the line if another round of lockdowns materializes.The Federal Reserve also warned this week about the rise in assets. Consumer Price Index figures this morning revealed a higher-than-expected pace of growth for October as it rose by 0.9% over the 0.6% estimated. The average CPI for the year increased from 5.9% to 6.2%. This represents the fastest rise since 1990. Indeed, we shall see how markets digest it and how it shapes the need for the Fed to tighten more, something that ultimately could benefit the buck and cause a dwindle in equities.Further safe-haven potential could come from news of payment or no payment from problematic Chinese real estate tycoon Evergrande. Recent headlines out of the world’s second-largest economy have been worrisome indicating that there could be other firms in similar trouble, and it could affect even Wall Street.
What to Watch Today…
- No major economic events scheduled for today
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EUR
The Euro is down and falling at the time of writing as a reaction to the high CPI numbers out of the U.S. for October. A ZEW Confidence survey showed that there is a negative assessment of the economic reality of Germany, where an eventful year has been marked by the end of Merkel’s tenure and political friction in finding her successor.
Another member of the European Central Bank, Isabel Schnabel, expressed concern that tightening current policy could derail the recovery and hiking interest rates risks adding to inequality across the Euro-zone countries. Certainly, things are looking dollar-positive especially as economic indicators in Europe fail to impress.
GBP
Pound is falling along with all other currencies to the buck as the CPI release helped give greenback an average of half a percent jump instantly. As of now, Sterling is close to being at its weakest price since the end of September. Without a ton of news from the U.K. expect the buck to have a day of gains unless we get a surprise.
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