U.S. Dollar King to Start November

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U.S. Dollar King to Start November

NOVEMBER 01, 2021

The U.S. Dollar is benefitting this morning from market belief that the Fed will be normalizing its monetary policy, which is increasing yields in the bond market. 

Overview

Additionally, the global thinking is that inflation will remain elevated and likely permanent while slowing down gradually into next year. Although the buck has made a comeback after some dramatic swings in the past week and a half, October closed as a losing month overall for its value. The end of the year will be marked by Congress pushing to pass a large spending bill and the globe’s advancement in combating the bottlenecks in the supply chain worldwide.

It seems at the moment there is a split in market moods. Some look at the risk-on sentiment and 82.0% of S&P 500 companies showing better-than-expected earnings and think we are headed towards a booming economy, however, there are plenty arguing that inflationary growth could spiral out of control and that central bank tightening will exacerbate other economic recovery issues. We think the buck has no clear direction while the medical concern over Delta/COVID remains from truly fading away.

What to Watch Today…

  • No major economic events scheduled for today

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EUR

Yields are also rising in the European bond market while the currency stumbles as market guidance in FX is still navigating through a lot of concerns. The European Central Bank has certainly started to slow down its bond purchases, particularly cutting down the Pandemic Emergency Purchasing Program (PEPP) and it is making sure the environment stays accommodative by staying away from interest rate talk.

We shall see what the continent does as a whole in the next few months, but there are a lot of differences between each nation as they are coming out of the pandemic. If they all perform well, expect Euro recovery.

AUD

The “Aussie” is not down as bad as other currencies at the moment as the Reserve Bank of Australia meets tomorrow. While a hike may not occur, there is the likelihood the positive outlook will improve the Antipodean currency.

We shall see how tomorrow may give light as to what central banks may do as a whole, if they are indeed feeling confident, in taking away stimulus to let the economy ride on its own. Dollar swings are not fading away as a common thing of 2020.

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