The dollar is flirting with its yearly highs this morning, posting small gains versus its low-yielding peers – the euro, the British pound, the Swiss franc and the Japanese yen.
Commodity-related currencies are on the up this morning, with the New Zealand Dollar and Swiss Franc (NZD/CHF) pair being the best performers of the day among major currencies, followed by the Norwegian Krone (CHF/NOK) and the Canadian dollar, or Loonie (CAD/CHF), after major central banks disappointed market expectations last week.
On Friday, US non-farm payrolls came in higher than expected in October, and the September figure was revised up, strengthening the case for more interest-rate hikes next year.
Elsewhere, emerging market currencies are trading in a mixed fashion, with the South African rand (ZAR) up 0.2% against the dollar, the Mexican peso (MXN) down 0.25% and the Russian ruble (RUB) down 0.5%.
Forex daily matrix: 8 November 2021
US dollar index
As of the time of writing, the US dollar index (DXY) is trading flat at 94.27.
On Friday, US non-farm payrolls increased by 531.000 in October – higher than the consensus (450.000) – and the September release was revised up from 194.000 to 317.000. The unemployment rate edged further down by 0.2%, to 4.6%, while the consensus was for a fall in unemployment to 4.7%.
Overall, the latest data point to the US labour market continuing its strong rebound from the pandemic, strengthening the case for a more hawkish stance by the US Federal Reserve (the Fed) next year.
The market is now already pricing in the highest probability for two interest-rate hikes from the Fed by the end of next year.
This week, the key market focus is on the October Consumer Price Index (CPI), which will be released on Wednesday. Market consensus expects the US headline CPI to increase by 0.6% in October from a month earlier, and the core CPI – which excludes energy and food items – to increase by 0.3%.
Today, Richard Clarida, the Fed’s vice chair, will speak at a virtual event hosted by the Brookings Institution concerning flexible average-inflation targeting and prospects for US monetary policy, while Fed chair Jerome Powell will open remarks at the Gender and the Economy Conference, hosted by the Federal Reserve Board.
DXY technical levels:
- 52-week high: 94.61
- 52-week low: 89.212
- 50-day moving average: 93.509
- 200-day moving average: 92.057
- 14-day relative strength index (RSI): 58.11
Chart of the day: Commodity-related currencies versus US dollar over the past three months
Retail sales were weaker than expected in September, falling by 0.3% on the month, following a rise of 0.3% in August.
Today, eurozone area finance ministers will convene in the Eurogroup to address the euro area’s macroeconomic outlook, including inflation and policy prospects, as well as the usage of a digital euro in light of the global economy’s rapid digitisation.
EUR/USD technical levels:
- 52-week high: 1.2349
- 52-week low: 1.1511
- 50-day moving average: 1.1677
- 200-day moving average: 1.1890
- 14-day relative strength index (RSI): 44.92
GBP/USD is down 0.1% to 1.3482 this morning.
Last week, the British pound had the second-worst weekly performance year-to-date, tumbling 1.44% against the dollar after the Bank of England’s Monetary Policy Committee (MPC) decided to keep the policy rate unchanged at 0.1%, disappointing market expectations.
Huw Pill, the Bank of England's chief economist, said on Friday that wage inflation in the UK is expected to outpace both the US and the eurozone, implying that a UK rate hike may be imminent.
GBP/USD technical levels:
- 52-week high: 1.4248
- 52-week low: 1.2901
- 50-day moving average: 1.3699
- 200-day moving average: 1.3847
- 14-day relative strength index (RSI): 36.41
Forex Performance Heatmap – 8 November 2021
Other currency pairs (daily % change):
The day ahead:
- Speech of the Fed’s vice chair, Richard Clarida
- Speech from the Fed chair, Jerome Powell
- Speech of the Fed Board’s governor, Michelle Bowman
- Eurogroup meeting