Safe-haven currencies advance, EUR slips and Turkish lira crumbles
10:11, 19 November 2021
A risk-off mood prevailed on forex markets in today’s European trading session, with safe-haven currencies such as the US dollar and Japanese yen gaining ground against other major fiat urrencies.
The euro is among the worst performer this morning on growing worries of a new lockdown in Europe to curb the fourth Covid-19 wave. Germany’s health minister, Jens Spahn, said the country is facing a “national emergency”. EUR/USD was down 0.6% to 1.1304 at 09:49 GMT.
The British pound also weakened against the dollar by -0.5% to 1.3431, despite the fact UK retail sales rose more than expected in October.
Oil-linked currencies continue to trade weakly. The Canadian dollar (CAD) erased all its October gains, while Norwegian krone (NOK) was down 0.9% following eight straight sessions of losses versus the dollar.
Yesterday, the Turkish lira crumbled 4.5%, hitting new all-time lows following a 100 basis point (BPS) rate cut to 15% by the Central Bank of Turkey (CBT), a day after President Recep Tayyip Erdoğan’s comments on the need to lower interest rates to ease the burden on the population.
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Forex daily matrix – 19 November 2021
As of writing, the US Dollar index (DXY) was last at 95.89 level, up 0.4% from its previous close. Increased US inflation and prospects for monetary policy normalisation continue to be the primary drivers of the dollar’s recent rise.
Money markets are currently assigning a 64.5% probability that the US Federal Reserve (the Fed) will start hiking interest rates in June next year.
Several Fed members spoke yesterday on prospects for inflation and interest rates. Charles Evans, head of the Chicago Fed, believes interest rate increases should begin next year or in 2023, while Raphael Bostic, president and CEO of the Atlanta Fed, expresses the need normalise interest policy as labour market “will be pretty much at pre-pandemic” by next summer.
According to New York Fed president and CEO John Williams, pricing pressures are becoming broad-based, with very strong demand in the US.
Meanwhile, the market’s focus moves next week to the appointment of the new Fed chairman, which may be revealed before Thanksgiving.
According to Predictit.org, Jerome Powell’s reappointment is the most probable result (66%), while a chance of Leal Brainard's appointment – typically seen as a more dovish chairman by the market – is currently at 34%.
DXY technical levels:
- 52-week high: 96.20
- 52-week low: 89.212
- 50-day moving average: 93.98
- 200-day moving average: 92.23
- 14-day relative strength index (RSI): 68.91
Chart of the day: Dollar is again ‘King’ in November
The euro extended its losses to 1.1304 against the US dollar, down 0.6% from its previous close.
This morning, European Central Bank (ECB) President Christine Lagarde once again provided a dovish message, stating that the eurozone must consistently reach its 2% price target before tightening its monetary policy.
Meanwhile, Covid-19 is again topping the headlines. Germany’s federal minister of health, Jens Spah, said this morning that “vaccinations alone are not enough to limit the spread of Covid-19 in Germany”. He added: “Germany is in the midst of a national emergency.”
EUR/USD technical levels:
- 52-week high: 1.2349
- 52-week low: 1.1262
- 50-day moving average: 1.1594
- 200-day moving average: 1.1906
- 14-day relative strength index (RSI): 28.66
The GBP/USD pair last stood at 1.3428 in London midday trading, down 0.4% from its previous close.
On the data front, UK retail sales increased 0.8% on a monthly basis in October, above forecasts (0.6%) and following a 0.6% decline in September. The GfK Consumer Confidence Barometer rose three points to -14 in November 2021, up from an eight-month low of -17 in October and above market predictions of a modest decline to -18.
Money markets are now fully pricing in a 15bps rate hike by the Bank of England (BoE) at the December’s meeting, according to the latest Chicago Mercantile Exchange (CME) BoE Watch.
GBP/USD technical levels:
- 52-week high: 1.4248
- 52-week low: 1.3133
- 50-day moving average: 1.3638
- 200-day moving average: 1.3835
- 14-day relative strength index (RSI): 39.75
Forex Performance Heatmap – 19 November 2021
Other currency pairs (% change from previous close):
- USD/JPY -0.44%
- USD/CHF -0.21%
- USD/CAD +0.31%
- AUD/USD -0.45%
- NZD/USD -0.40%
- USD/MXN +0.27%
- USD/ZAR +0.93%
- USD/TRY + 0.32%
- USD/RUB +0.20%
- EUR/NOK +0.2%
- EUR/SEK +0.12%
- EUR/PLN +0.39%
- EUR/HUF +0.39%