This morning, the US dollar seems to be losing ground again in anticipation of upcoming macroeconomic data later in the week. We are specifically talking about data from the US labor market and the popular NFP.
Improvement in the markets. Is the dollar losing again?
This morning, the US dollar seems to be losing ground again in anticipation of upcoming macroeconomic data later in the week. We are specifically talking about data from the US labor market and the popular NFP.
The U.S. Dollar Index on Tuesday seems to have fallen below 106.5 points, despite earlier statements by U.S. Federal Reserve officials. James Bullard of the St. Louis Fed said the central bank still has "a lot of work to do to become restrictive," reiterating that "the interest rate needs to rise to at least 5% to bring inflation down." New York Fed President John Williams also said that "rates must continue to rise and remain high until next year, while being open to a rate cut in 2024." However, the Fed is widely expected to slow the pace of tightening to 50 basis points in December after four 75 basis point hikes in a row.
Meanwhile, Fed Vice Chair Lael Brainard warned that lower supply elasticity due to the effects of Covid-19 and the war could lead to a period of higher volatility in inflation data. This phenomenon could be the largest in several decades. Brainard added that "the experience with the pandemic and the war highlights the challenges for monetary policy in responding to a prolonged series of adverse supply shocks," BBN reported.
Source: Conotoxia MT5, USDIndex, H1
China's infections decline
One short-term factor that appears probably to influence the behavior of financial markets is the situation in China. After a record number of infections, investors' eyes may be on both the protests and the scale of the outbreak. According to the latest information, the number of newly registered cases fell for the first time in more than a week, the Health Commission (NHC) reported. The figure was said to have dropped from more than 40,000 infections to 38645 newly registered infections. The fewer infections there are, the fewer restrictions may not be enforced, as there would be no need for them, which could help both Chinese citizens and the economy. Additionally, Chinese authorities have announced a press conference on the Zero-Covid policy, which may already have markets hoping for a loosening of restrictions.
Stock market, commodities and cryptocurrencies rebound
U.S. index futures seem to be pointing to the possibility of a positive opening to the session on Wall Street. Futures on the Dow Jones Industrial Average are up more than 0.2%, while the Nasdaq 100 is up 0.6% this morning. Meanwhile, in Shanghai, the local stock index rose more than 2% to 3144 points. On the commodities market, we could see oil prices rise by more than 1.6% to $78 per barrel. Gold, on the other hand, rose 0.7% to $1,753, and silver rose 1.45% to $21.20 per ounce. The cryptocurrency market is also trying to bounce back. The price of bitcoin has risen to $16456, and Ether is back above $1200.
Daniel Kostecki, Director of the Polish branch of Conotoxia Ltd. (Conotoxia investment service)
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