Daily Market Update

Dollar Rises; Equities Fall on Chinese Covid Fears

November 21, 2022

The U.S dollar is on the front foot to start the week.

Overview

The Bloomberg Dollar Spot Index is up 0.7% as the greenback enjoys broad strength as global equities are deep in the red. The risk-off mood comes as China tightens its grip on its “Covid Zero” policy. China saw its first Covid-related death in almost half a year on Saturday and another two on Sunday. Investors are worried that the worsening outbreak around the country will lead to more drastic restrictions that will dampen growth and threaten higher global inflation.

The economic docket is fairly light to start the holiday-shortened week. The U.S. Chicago Fed national activity index will be released shortly. There is a slew of data due out Tuesday and Wednesday. We believe market participants will choose to focus on the release of the minutes of the Federal Reserve’s latest interest rate decision. The timing of the release could be interesting (2 pm on Wednesday) as market conditions are likely to be thin as traders check out early for the Thanksgiving break.

 

What to Watch Today…

  • United States v. Wales in the World Cup at 2 p.m. 

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AUD ⇓

The Aussie dollar dropped over a percent overnight and is set for its fourth daily decline against its American rival.  The fate of the Aussie dollar in the immediate near term is likely to hinge on China’s reaction to the fresh covid outbreak.  China is Australia’s largest trading partner, and its economy is strongly linked to demand from the world’s second-largest economy. AUD/USD has fallen 2.65% over the past four days.

 

CAD ⇓

The Canadian dollar was another victim of widespread U.S. dollar strength overnight.  The loonie dropped about half a percent.  West Texas Intermediate also dropped 0.6%.  Energy analysts point to the threat that China will re-enact lockdowns that will sap demand for oil as the reason for today’s dip. The Canadian economic docket is light, with only the Bloomberg Nanos Confidence print due out this morning

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