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US Fed Chair Jerome Powell, in testimony prepared for delivery Tuesday before the Senate Banking Committee, and released Monday by the Fed, said that he continues to expect high inflation to recede over the next year as supply and demand come into better balance, but warned that prices could continue to rise for longer than earlier thought.
This is supportive of the US dollar that is likely to outperform from both a risk-off profile and due to the divergence between the Federal Reserve and those central banks of other nations where growth is lagging the US.
Economic Data
The federal statistics agency Destatis released preliminary data, on Monday, showing German consumer prices had hit a 29-year high in November, as soaring energy costs and supply chain bottlenecks weigh on Europe’s top economy.
The year-on-year inflation rate has accelerated for the fifth month in a row now, with a number of factors at play.
The 5.2% surge for November is partially driven by a rise in energy prices, which are 22% higher than they were at this same time last year.
Pending Home Sales in the US jumped by 7.5% on a monthly basis in October following September’s 2.3% drop, data published by the US National Association of Realtors showed on Monday.
That saw the Pending Home Sales index jump to 125.2 in October from 116.5 in September. On a YoY basis, sales were down 1.4% in October, given the Pending Home Sales index in October 2020 scored 127.0.
The US dollar has not reacted to the latest US housing numbers. The DXY continues to nudge higher as traders continue to unwind last Friday’s steep drop. At present, the index is trading just under 96.40.
Other Developments
OPEC+ has postponed two meetings scheduled for the current week in order to avail more time to evaluate the implications of the latest coronavirus update about the emergence of a highly mutated variant.
The group had moved the meeting of its joint technical committee to Wednesday from Monday, and the meeting of the joint ministerial committee to Thursday from Tuesday. Another two meetings, of OPEC and OPEC+, will take place as originally planned, on Wednesday and Thursday.
News of omicron’s emergence last week did on Friday what the release of 50 million barrels from the U.S. strategic petroleum reserve couldn’t do, as it led to a sharp drop in oil prices, with Brent crude shedding over $10 in a single day and WTI falling below $70 per barrel for the first time in months.
Bargain buying in technology stocks has driven Wall Street higher on Monday following a collapse related to Omicron strain, while the Dow Jones lagged its peers as major banks fell and investors awaited more information on the new coronavirus variant.
The S&P technology subindex jumped 2.1%, indicating that investors were likely favoring pandemic-resistant technology stocks amid growing fears of Omicron.
Gains in Amazon.com and Tesla also drove the S&P consumer discretionary sector 1.7% higher, with investors viewing Friday’s losses as a cue for bargain hunting into high-value tech names.
Wall Street indexes had slumped between 2.0% and 3.5% on Friday following news of the Omicron variant.
The Dow Jones Industrial Average was up 136.63 points, or 0.39%, at 35,035.97 and the S&P 500 was up 50.66 points, or 1.10%, at 4,645.28. The Nasdaq Composite was up 232.46 points, or 1.50%, at 15,724.11.
