The end of last week brought a strong turnaround in the US dollar following the release of inflation data from the US. The annual inflation rate in the US slowed to 7.7% in October, the lowest since January. The consensus was for a reading of 8%. Following the publication, the EUR/USD exchange rate hit its highest since August 2022.
In the United States, energy costs rose 17.6%. The slowdown was also seen in food (10.9% vs. 11.2% in September) and used cars and trucks (2% vs. 7.2%). Compared to the previous month, the CPI rose 0.4%, below expectations of 0.6%, tradingeconomics calculated. At the same time, the cost of medical services pushed the CPI down. Nonetheless, the data could still point to strong inflationary pressures and broad price increases across the economy, mainly in the services sector, while commodity prices benefited from some improvements in supply chains, according to data released Friday. As a result, the dollar index lost about 4% last week, as the lower inflation reading seemed to strengthen the case for a less aggressive tightening path from the Fed. Investors are betting that the U.S. central bank would limit the size of rate hikes to 50 basis points from December, after a series of 75 basis points over the past four meetings.
Source: Conotoxia MT5, USDIndex, Daily
Dollar exchange rate at the start of the week
The dollar index rose toward 107 points on Monday, recovering slightly from near three-month lows after Federal Reserve Chairman Christopher Waller warned investors against too much optimism over a single inflation report and said the central bank "still has a long way to go" with interest rate hikes. Waller acknowledged that the Fed may slow the pace of interest rate hikes at upcoming meetings, but stressed that markets should focus on the final level, which is possibly still "a long way off," rather than the pace of any move, tradingeconomics reported.
Meanwhile, Boston Federal Reserve President Susan Collins said Friday that she believes the Fed will continue to raise interest rates at upcoming FOMC meetings. The next FOMC meeting is scheduled for December 14. Commenting on the latest inflation data for October, Collins said it is still too early to determine the peak of the Fed's rate cycle. However, she noted that the risk of excessive tightening has increased, BBN reported.
Cryptogeddon continues
On Monday morning, bitcoin cost less than $16,000, approaching a two-year low. This marks a drop of nearly 80 percent from last year's peak, bringing the current correction on BTC closer to similar percentage levels as after 2012 and 2016. (then BTC corrected by 86 and 83 percent from its peak). The FTX exchange has officially filed for bankruptcy, which may also involve problems for its affiliated companies (130 entities are in question) and its investors. Within days, FTX, one of the world's largest cryptocurrency exchanges, collapsed after concerns about its financial situation triggered a "run on the bank" and a wave of withdrawals from the exchange. It turned out that the exchange couldn't withdraw all of its customers' funds because it didn't have any. Fears of insolvency intensified after Binance abandoned its plan to acquire FTX. On top of that, Sam Bankman-Fried allegedly used customer funds to support the exchange's sister company, Alameda Research. Additionally, top-level employees of both FTX and Alameda are said to be looking for a way to leave the United States or are already outside the U.S., The target is said to be countries without an extradition treaty with the United States.
In just one week, the price of bitcoin fell by 23 percent, ETH by nearly 25 percent, Solana took a dive of nearly 60 percent, and the Binance exchange token fell by 20 percent. The bitcoin cash seemed to lose the least during this time with a drop of 15 percent.
Source: Conotoxia MT5, BTCUSD, Weekly
Daniel Kostecki, Director of the Polish branch of Conotoxia Ltd. (Conotoxia investment service)
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