On Wednesday, the New Zealand dollar was the best-performing currency among the 20 global currencies we track, while the U.S. dollar showed the weakest results. The Russian rouble was the leader among emerging markets, while the Chinese yuan underperformed.
In focus today
U.S. Dollar Index
The U.S. Dollar Index (DXY) fell sharply after weaker-than-expected U.S. jobless claims, S&P Global November PMI data, and relatively dovish Federal Reserve (Fed) minutes.
Possible effects for traders
Although October durable goods orders and new home sales came out stronger than expected, the market preferred to focus on rising jobless claims and a sharp drop in services PMI indicating weaker inflationary pressure. In addition, November FOMC minutes showed that officials were eager to slow the pace of rate hikes. ‘I think now it is almost certain that we’ll see the FOMC slow its pace of tightening from December,’ said Carol Kong, a currency strategist at the Commonwealth Bank of Australia. Still, despite a consensus that rates will rise more slowly, there is a lot of uncertainty about how high rates might eventually climb. Currently, 114.00 looks like a major long-term aim for the DXY. The short-term bearish trend remains unchanged, and DXY may move to 103.50 if it drops below 105.00. Today, the market activity will likely pause due to the U.S. Thanksgiving.
XAUUSD
The gold price was up by more than 0.5% on Wednesday as the U.S. dollar retreated after the release of weak economic data. Moreover, November Fed meeting minutes showed that a ‘substantial majority’ of members opted to slow rate hikes.
Possible effects for traders
The Fed fears overtightening, so it seems reasonable to assume that the pace of hikes will drop to 50 basis points (bps) in December. ‘Knowing that the bulk of those interest rate hikes are already factored into the market, I would say there is no longer a dark cloud of interest rate hikes looming over the gold market,’ said David Meger, director of metals trading at High Ridge Future. XAUUSD need to consolidate above 1,760 to move higher. Bulls are still targeting 1,800 as emerging markets’ physical demand remains high and central banks continue to purchase yellow metal to diversify foreign reserves.
EURUSD
The euro surged by 0.9% due to the broader weakness of the U.S. dollar and better-than-expected eurozone economic data.
Possible effects for traders
Yesterday, German and eurozone PMI figures were less bearish, bringing hopes of a milder recession. In addition, hawkish comments from the European Central Bank (ECB) supported EURUSD. Luis de Guindos, the ECB Vice-President, said the regulator will keep raising interest rates until it brings inflation to around 2%. It is ECB’s mid-term goal even though the eurozone economy is heading towards a recession. The ECB Monetary Policy Meeting Accounts are due at 12:30 p.m. GMT today. They may shed more light on the ECB’s further monetary policy. Today, volatility will probably be low due to the U.S. Thanksgiving. Bulls target previous highs near 1.04800, but the momentum has weakened.
Other events
XTIUSD
The U.S. crude oil fell by 4.6% after supply fears eased as it became clear the Group of Seven (G7) nations considers a high price cap on Russian oil.
Possible effects for traders
According to Reuters, the G7 was looking to cap Russian seaborne oil price at $65–70 per barrel. However, European Union governments have not yet reached a consensus on this matter. Commonwealth Bank commodities analyst Vivek Dhar said the $65–70/bbl range would be higher than markets expected, but it would reduce the risk of disrupted global supply. Yesterday, the Energy Information Agency (EIA) reported a larger-than-expected increase in U.S. gasoline inventories, putting more downward pressure on XTIUSD. Still, crude oil stock continued to fall, and the U.S. Strategic Petroleum Reserve (SPR) sales are almost finished. Therefore, the pressure on XTIUSD remains primarily bullish. Oil could potentially rebound from the support level of 76–75 on bargain buying.
