The United States Dollar is trading in muted but slightly positive ranges this morning as traditionally denominated risk-forward and risk-averse events pull markets in divergent directions.
Overview
On one side of the spectrum, the Chinese GDP released last night beat expectations. Coming in at 4.9% QoQ for the months of July through September, this is just shy of the Chinese government’s target of 5% for the year. Industrial output and retail sales in China also grew more than expected, providing a boost to GDP. Property investment, however, contracted more than expected and posted a figure of -9.1% for Q3. Though not necessarily a surprise given recent woes in the nation’s property sector, this is still undoubtedly quite the drag on GDP as a whole.
Conversely, the war between Israel and Hamas took a dark turn yesterday afternoon after a blast at Gaza’s largest hospital reportedly killed more than 500 people. Both Israeli forces and Hamas have disavowed responsibility for the explosion at Al-Ahli Anglican Hospital in Gaza City, and major US news outlets are unable to independently verify what exactly caused the blast. President Joe Biden arrived in Israel this morning and appeared to lay blame on “the other team,” echoing Israeli assertions that the bombing was a result of a faulty Islamic Jihad rocket. Many nations in the Levant, however, do not accept Israel’s claims, and as a result, Biden’s scheduled summit today with Jordanian, Egyptian, and Palestinian leaders was canceled by Jordan. According to the Palestinian Authority, nearly 3,500 people have been killed in Gaza since October 7. Gold and oil futures jumped on this newest development as the conflict in the region threatens to spill over and involve more nations.
US Treasury yields also jumped up yet again yesterday, both on international conflict and domestic leadership struggles. Jim Jordan lost the first vote in his race to be Speaker of the House of Representatives Tuesday afternoon, and, though he will likely keep running for the post, it’s unclear if he can prevail over split factions in his own party. Adding to the complication of the battle for the speakership, the US government’s continuing resolution to keep itself funded will expire in the middle of next month, and yet another shutdown showdown will likely dominate news cycles. Though US economic data has proven strong, a potential shutdown could impact current expectations on the Federal Reserve’s potential hike at its December meeting. Some speculate that the recent spike in treasury yields may take the place of additional rate hikes from the Fed.
What to Watch Today…
EUR ⇓
The single currency retraced overnight and lost most of yesterday’s gains as CPI for the Eurozone came in dead on expectations. At 4.5% YoY and 0.3% monthly, this is the same figure as last month’s reading, good news for the European Central Bank, who signaled last month that they are likely finished hiking interest rates. When compared with a hot inflation reading out of the US last week, though, this places the Euro below the USD entering the morning.
GBP ⇓
Pound Sterling initially spiked overnight but retraced to settle slightly lower to enter the US session this morning. UK CPI was also released overnight and showed a slight increase both on core and full readings, fueling speculation that the Bank of England may raise interest rates once again. UK inflation has consistently remained well above both that of the US and the EU, though the Pound has been unable to capitalize on this streak. It appears geopolitical strife has more sway on the GBP/USD pairing at the moment as investors seek safer returns.
