The dollar is strengthening against its major peers on Wednesday, as markets cautiously await the today’s release of the US CPI (Consumer Price Index) for October.
The Loonie (CAD) is outperforming among the majors amid stronger crude oil prices, while the Kiwi (NZD) and Aussie (AUD) are weakening as metal prices softened and Asian stock markets posted losses overnight.
The Swiss franc (CHF) and the Japanese yen (JPY) are down 0.17% and 0.24%, respectively, against the greenback. The Norwegian krone (NOK) is sliding after inflation data in Norway fell short of forecasts, undermining market expectations for a faster pace of rate hikes.
Elsewhere, emerging market currencies are weaker this morning, with the South African rand (ZAR) 0.6% lower versus the dollar and the Turkish lira (TRY), down 0.73%, is hovering around its all-time lows.
Forex Daily Matrix – 10 November 2021
As of writing, the US Dollar index (DXY) was last at 94.14 level, up 0.23% on the day.
The main market focus for the day is on the released of the October’s US CPI data. Consensus is for a 0.4% monthly increase in core inflation (CPI excluding food and energy), to 4.3% on the year, while headline inflation (CPI) is expected to jump by 0.6% on the month, to 5.8% year-on-year.
Investors will also closely look at how inflation is spreading out into non-transitory components, and in particular the cost of shelters (housing) which accounts for a third of the overall basket.
A higher-than-expected inflation print today might fuel again market speculation about the Fed raising interest rates more quickly. Markets are now pricing in a 56.5% probability Fed starts hiking interest rate in June next year.
Yesterday, the NFIB Small Business Optimism Index fell by 0.9 point to 98.2 in October, mainly due to growing tightness in the US labour market. The share of firms raising wages rose to 44%, hitting 48-year high, while the share of those planning to do so in the next three months rose to 32%.
DXY technical levels:
- 52-week high: 94.58
- 52-week low: 89.212
- 50-day moving average: 93.529
- 200-day moving average: 92.062
- 14-day Relative Strength Index (RSI): 55.40
Chart of the day: US inflation has never been as high as it is now in the past 30 years
Yesterday, the ZEW Indicator of Economic Sentiment in Germany increased by 9.4 point to 31.7 in November 2021, the first increase since May, and well above market expectations of a 2.3pt fall.
Monthly inflation rate in Germany rose 0.5% in October, to 4.5% on the year, the highest level since August 1993, in line with preliminary estimates.
EUR/USD technical levels:
- 52-week high: 1.2349
- 52-week low: 1.1511
- 50-day moving average: 1.1669
- 200-day moving average: 1.1885
- 14-day Relative Strength Index (RSI): 44.11
GBP/USD is down 0.15% to 1.3532 as of writing.
The cable has lost 2.5% of its value over the past three months and is trading 1.16% below its 50-day moving average.
On Monday, Governor Andrew Bailey, reiterated that the BoE “would and will have to act" when inflation becomes generalised in the economy. The Bank of England voted by a majority of 7-2 last week to maintain its benchmark interest rate at a record low of 0.1 percent.
GBP/USD technical levels.
- 52-week high: 1.4248
- 52-week low: 1.2901
- 50-day moving average: 1.3691
- 200-day moving average: 1.3846
- 14-day Relative Strength Index (RSI): 39.77
Forex Performance Heatmap – 10 November 2021
Other currency pairs (daily % change):
The day ahead:
- 09:00 UTC Italy Industrial Production – September: 4% y/y (consensus); 0% y/y (previous)
- 09:30 UTC ECB Elderson Speech
- 13:30 UTC BoE Tenreyro Speech
- 13:30 UTC US Inflation Rate – October: 5.8% y/y (consensus); 5.4% y/y (previous)
- 13:30 UTC US Core Inflation Rate – October: 4.3% y/y (consensus); 4.0% y/y (previous)
- 14:30 UTC US Initial Jobless Claims – week ending 6 November: 265.000 (consensus); 269.000 (previous)
- 16:30 UTC EIA Crude Oil Stocks Change – week ending 5 November: 2.125 mln (consensus); 3.291 mln (previous)