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USD firm post Powell’s remarks, commodity currencies rebound

By Piero Cingari

09:57, 1 December 2021

US dollar bills on background with dynamics of exchange rates
US Fed chair Jerome Powell admits inflation is no longer temporary – Photo: Shutterstock

The US dollar recovered yesterday as Federal Reserve Chairman Jerome Powell hinted that the Fed might accelerate its tapering in response to mounting inflationary pressures, which now are no longer viewed as temporary.

This morning DXY index was last at 95.85 (+0.02%) by 10:00 GMT

Low-yielding, such as the euro (EUR), and safe-haven currencies, such as Swiss franc (CHF) and Japanese yen (JPY), which had outperformed on Omicron worries in recent sessions, suffered a significant knock yesterday as the issue of monetary policy divergence with the Fed has been revived.

Risk-sensitive currencies, such as the Australian (AUD) and the New Zealand dollar (NZD) gained ground after Oxford University declared that there is no evidence that vaccines will not protect against severe illness in the case of an Omicron infection.

Meanwhile, commodity-linked currencies rebounded as crude prices rose overnight, with Brent breaking $70 per barrel.

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Forex Daily Matrix – 1 December 2021

A forex table that compares nine major currencies against each other, including USD, EUR, GBY, JPY, CHF, AUD, NZD, CAD and NOKForex Daily Matrix as of 1 December 2021, 10:00 GMT – Credit: Capital.com

US Dollar

The US Dollar Index (DXY) was last at 95.85, unchanged on the day.

Fed chair Powell clearly shifted the tone yesterday during the Senate hearing, suggesting that it is no longer appropriate to describe inflation as “transitory” and that tapering may be accelerated to address rising inflationary pressures.

Among the data reported today, the attention will be on the ADP’s change in private employment in November, which is forecasted at 525 thousand by the consensus. November’s manufacturing ISM is predicted to remain unchanged (60.8) from October.

Meanwhile, market expectations for the Fed’s first interest-rate hike have accelerated in response to Powell’s remarks. US money markets now assign a 50-50 likelihood of a rate rise in May of next year. Yields on the 10-year US Treasury rose by 5 basis points to 1.49%. 

Today, Jerome Powell and economist Janet Yellen will testify again in Congress.

US dollar (DXY) technical levels:

  • 52-week high: 96.52
  • 52-week low: 89.212
  • 50-day moving average (1-day chart): 94.51
  • 200-day moving average (1-day chart): 92.47
  • 14-day Relative Strength Index (RSI) (1-day chart): 58.28

Euro

While writing, EUR/USD was at 1.1335, unchanged from its previous close, while the single currency was 0.2% lower against the British pound. 

AUD/USD

0.66 Price
-0.130% 1D Chg, %
Long position overnight fee -0.0073%
Short position overnight fee -0.0009%
Overnight fee time 22:00 (UTC)
Spread 0.00006

GBP/USD

1.26 Price
-0.570% 1D Chg, %
Long position overnight fee -0.0047%
Short position overnight fee -0.0035%
Overnight fee time 22:00 (UTC)
Spread 0.00013

EUR/USD

1.09 Price
-0.740% 1D Chg, %
Long position overnight fee -0.0080%
Short position overnight fee -0.0003%
Overnight fee time 22:00 (UTC)
Spread 0.00006

USD/JPY

148.23 Price
+0.680% 1D Chg, %
Long position overnight fee 0.0108%
Short position overnight fee -0.0190%
Overnight fee time 22:00 (UTC)
Spread 0.010

This morning in Germany, October retail sales fell by -0.3% month-on-month (m-o-m), after the previous decline of -1.9% m-o-m.

November’s Markit Euro Area Manufacturing PMI came in at 58.4 points, slightly below a preliminary estimate of 58.6.

Yesterday, inflation in the eurozone reached a new all-time high in November, the highest level since the surveys began in 1997.

Headline inflation rose at 4.9% year-on-year (y-o-y) from 4.1%, and well above the consensus (4.5%), while the core measure, net of food and energy, rose to 2.6% y-o-y from 2.1% previously.

EUR/USD technical levels:

  • 52-week high: 1.2349
  • 52-week low: 1.1184
  • 50-day moving average (1-day chart): 1.1524
  • 200-day moving average (1-day chart): 1.1828
  • 14-day Relative Strength Index (RSI) (1-day chart): 42.73

Chart of the day: Euro Area inflation rate hits its all-time highs in November 2021

A chart showing the headline and the core inflation rate in the euro area since 1991Euro area headline and core inflation – Credit: Koyfin

British pound

Cable (GBP/USD) was last at 1.3325 slightly up (+0.2%) on the day.

Pandemic-related news continues to weigh on sterling. In Scotland, new cases of the Omicron variant have been detected, some unrelated to prior travels, and face mask use has been restored mandatory in England.

Yesterday, Bank of England (BoE) member Catherine Mann said Omicron might harm consumer confidence, undermining the economic recovery from the pandemic’s impact.

The BoE Governor Andrew Bailey is due to speak today at 14:00 GMT, although he is unlikely to offer much detail on monetary policy.

On the data front, the final reading of the IHS Markit/CIPS UK Manufacturing PMI was 58.1 in November, marginally lower than a preliminary estimate of 58.2 and up from 57.8 of the previous month.

GBP/USD technical levels:

  • 52-week high: 1.4248
  • 52-week low: 1.3133
  • 50-day moving average (1-day chart): 1.3571
  • 200-day moving average (1-day chart): 1.3811
  • 14-day Relative Strength Index (RSI) (1-day chart): 34.64

Forex Performance Heatmap – 1 December 2021

    A forex table showing the performance of US dollar and the euro against other currenciesForex Performance Heatmap as of 1 December 2021, 10:00 GMT – Credit: Capital.com

    Other currency pairs (% change from previous close)

    Read more: US Fed chair grilled on inflation outlook

    Markets in this article

    AUD/USD
    AUD/USD
    0.66082 USD
    -0.00088 -0.130%
    EUR/NOK
    EUR/NOK
    11.76427 USD
    0.07335 +0.630%
    EUR/PLN
    EUR/PLN
    4.34780 USD
    0.00967 +0.220%
    EUR/SEK
    EUR/SEK
    11.42349 USD
    0.06369 +0.560%
    EUR/USD
    EUR/USD
    1.08898 USD
    -0.00811 -0.740%

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