The United States Dollar is trading mixed against its G10 peers this morning but gaining ground against emerging markets as geopolitical tensions once again return to the forefront of the docket this morning.
Overview
Russia overnight fired an intercontinental ballistic missile (ICBM) along with several cruise missiles at the Ukrainian city of Dnipro. Though the payload of this particular missile was not nuclear, ICBMs do have the capability to carry nuclear payloads, so such a move is being treated as a major escalation in an already very hot war by markets. As such, haven assets and currencies are up on the morning. Following Ukraine’s use of western-made weapons to strike Russian territory earlier this week, markets are beginning to believe there is a more tangible risk of this war spilling over to involve western powers in a hot war rather than a proxy war. The Dollar’s bid on such fears looks to be largely tapped out, but there may be further room for other haven currencies to gain some ground should such fears prove to be true.
Nvidia’s earnings call also roiled markets after the close yesterday. The chipmaker’s revenue forecasts did not quite meet Wall Street’s highest expectation level, leading the stock to trade down roughly three percent after hours. The stock, however, turned around in the early minutes of the US morning session and led US equities to open higher. Bitcoin, as well, has continued to charge higher as of late, nearing the hundred thousand dollar mark in overnight trading yesterday.
With the data calendar out of the US fairly light through the remainder of the month, it’s likely that geopolitical risk narratives, Fedspeak, and further news on the incoming Trump administration will be primary drivers of FX markets. Traders will receive S&P Global’s flash PMI for November tomorrow morning.
What to Watch This Week…
- S&P Flash PMI NOV, Friday 9:45AM
- Monex USA Online is always open
AUD⇑
The Australian Dollar this morning is bucking a wider trend of USD strength, up roughly 0.15% against USD in early US trading. Westpac overnight revised its forecast for the path of interest rate cuts from the Reseve Bank of Australia and pushed back its call for a first cut from the RBA all the way to February. This makes Australia an outlier amidst a global cycle of easing from major central banks. Today’s move, however, does come in the face of substantial weakness from the Antipodean currency through the last few weeks as the economy of Australia’s largest trading partner China continues to be in flux.
JPY ⇑
Japanese Yen has continued to whipsaw in extremely choppy trading this week, this morning gaining nearly a percent of ground back against USD. Geopolitical risk has long been a primary driver of the USDJPY pair, and this week is no exception. The latest escalatory move from Russia in its war with Ukraine has provided JPY with a strong haven bid, and this is coupled with further jawboning from Bank of Japan Governor Kazuo Ueda overnight on the currency’s recent slide. Ueda reiterated that officials are closely watching the impacts of JPY’s pricing on the economy and inflation, and injected further uncertainty on the BoJ’s December policy decision.
