After a tumultuous session yesterday during the US banking holiday, the United States Dollar is trading in solidly mixed territory yesterday as the newest phase of the conflict between Israel and Hamas began over the weekend.
Overview
Traders across all markets are bracing for another day of tensions as geopolitics returns to the forefront of many minds. At least 1,500 lives have been claimed since Friday night. Rumors have swirled of various international involvement, and regional risks have threatened to spill over into the larger global market. Oil prices initially spiked on the news, but have since returned closer to Friday’s close.
As the dust begins to settle somewhat from the weekend’s events, focus in the US has shifted to renewed speculation that the Federal Reserve may in fact be done raising interest rates and will choose instead to hold on November 1. Dallas Fed President Lorie Logan, in particular, usually on the hawkish side of the spectrum, insinuated yesterday that the recent tightening in bond markets may be as effective as another rate hike and further Fed action may no longer be warranted. Fed minutes from September are due out Wednesday, followed by US CPI later this week.
The US’ “remarkable” economic strength in the face of global growth woes continues to be a focus internationally, highlighted by the International Monetary Fund over the weekend. While the IMF cut its growth forecasts for China and Europe, its global forecast remained unchanged after its projections for the US were upgraded. Important to note, however, is that the fund also stressed that it does not see global inflation returning to the 2% target even by the end of next year, driving more negative sentiment into international markets. Reports of possible Chinese stimulus provided the other side of the coin, in turn rendering the dollar close to flat on most G10 currencies after several sessions of losses.
What to Watch Today…
- US PPI Wednesday 8:30 AM
- UK GDP Thursday AM
- US CPI Thursday 8:30 AM
- US Michigan Consumer Sentiment Friday 10 AM
- Monex USA Online is always open
JPY ⇓
After markets initially turned to the Japanese Yen as a safe haven following the weekend’s wild geopolitical events, the island nation’s currency has turned around and is losing against the USD to the tune of a third of a percent this morning. Last Tuesday’s very sharp turnaround for JPY has failed to hold any real ground, and pricing has returned to the same level as the preceding Friday. Rumors of BoJ intervention have now proved to be unfounded, and it’s unlikely that JPY will see any sustained turnaround without action from the nation’s financial governing bodies.
EUR ⇑
The single currency appears to have found some footing last week, and the trend continues this morning, gaining a quarter of a percent against USD. Friday’s absolutely massive jobs reading from the US prompted some large swings for EUR/USD, but the currency ultimately recovered the morning’s losses and is continuing to gain today. Speculation that the Fed will not hike interest rates one final time is driving pricing as further interest rate divergence may not materialize.
