Global markets trade mixed on early Monday as the major central bankers’ defense of “higher for longer” rates joins unclear geopolitical headlines amid a light calendar. Even so, the US Dollar fails to gain acceptance while tracing the downbeat US Treasury bond yields.
The same, however, appears unable to lift the Gold price. That said, Crude oil extends the previous week’s recovery from a 3.5-month low whereas the Asia-Pacific shares edged lower. Further, US stock futures print mild losses despite a slightly positive weekly close of the Wall Street benchmarks.
Elsewhere, the softer US Dollar allows major currency pairs and Antipodeans to extend the latest recovery moves. Among them, NZDUSD, AUDUSD and USDJPY marked major moves against the Greenback whereas the USDCAD and the EURUSD struggle for clear directions. It should be noted that the GBPUSD defends the previous weekly gains but sounds cautious ahead of Bank of England (BoE) Governor Andrew Bailey’s speech.
Cryptocurrencies, however, witness a lack of momentum after refreshing multi-month tops the last week.
Following are the latest moves of the key assets:
The US Dollar’s gauge versus six major currencies, namely the US Dollar Index (DXY), dropped to the multi-day low even after the US Building Permits for October rose to 1.487M MoM versus 1.45M expected and 1.471M prior on Friday. On the same line, the Housing Starts also improved to 1.372M from 1.346M, versus 1.35M previous readouts. It should be noted, however, that the latest reading of the Atlanta Fed’s GDPNow tracker for the fourth quarter (Q4) came in 2.0% vs 2.2% prior.
Apart from the data, comments from Fed officials also weighed on the US Dollar. That said, Federal Reserve Bank of San Francisco President Mary Daly said, “Fed needs 'the boldness to wait' given uncertainty.” However, Chicago Fed President Austan Goolsbee showed readiness to do whatever it takes to beat inflation while adding, “There is a 'big gap' between the data and how consumers/businesses feel about the economy.” Further, Federal Reserve Bank of Boston President Susan Collins also tried to defend the policy hawks by saying, “I wouldn't take additional hiking off the table.”
Additionally, hopes of improving US-China ties also underpin the Gold upside. That said, China and the US agreed to hold the first commerce working group meeting in Q1 2024, as confirmed by the Chinese Commerce Ministry, last week.
However, fresh geopolitical concerns about the Middle East join the lack of confidence in China’s economic recovery to prod the US Dollar bulls. That said, the US issued fresh sanctions relating to Iran without providing more details. The move, however, may not be more effective as Tehran exports most of its oil to China and that supply is hard to tame. Recently, Yemen’s Houthis said they had taken control of a ship, the Galaxy Leader, in the southern Red Sea. That ship is the British-owned and Japanese-operated cargo and is reported to be partly owned by an Israeli businessman. The event flags more tension between the West and the East and put a floor under the US Dollar, even as the downbeat Treasury bond yields weigh on the Greenback amid the market’s rush for the US Treasury bonds.
It should be noted that the disappointing prints of the UK Retail Sales fail to tame the GBPUSD bulls amid hopes of witnessing tax cuts in the British budget as British finance minister Jeremy Hunt appears set to present Autumn Statement on Wednesday. Before him, BOE Governor Bailey will gain the Cable trader’s attention while Friday’s PMIs for November will also be crucial to watch for clear directions.
While there are no major data/events scheduled for release, BoE Governor Bailey’s speech will be eyed for entertainment as most BoE officials have defended the hawkish monetary policy but also cited the economic pessimism. If Bailey confirms the odds of witnessing the British recession, which is less likely, the GBPUSD could reverse the previous weekly gains. Elsewhere, the qualitative catalysts like China headlines, Fed clues and yields should be observed closely for detailed directions.
May the trading luck be with you!