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Finally, oil prices are rebounding from recent losses, on the back of reports that OPEC+ could adjust plans to raise oil production if large consuming countries release crude from their reserves or if the coronavirus pandemic dampens demand. This marks the latest development in the market after weeks long tug-of-war game.
Brent crude futures rose 81 cents, or 1%, to settle at $79.70 a barrel. WTI crude futures rose 81 cents, or 1%, to settle at $76.75 a barrel.
Prices of the Brent and U.S. West Texas Intermediate (WTI) crude benchmarks fell more than $1 in early trading, hitting their lowest levels since 1 October.
Earlier on Monday, OPEC+ officials warned that they are likely to respond and eventually react to plans by the largest oil consumers in the world to release oil from their strategic stockpiles, setting up a fresh fight for control of the global energy market.
The US dollar soared against all major currencies after President Biden officially reappointed Jerome Powell as Fed Chair and Lael Brainard will become Vice Chairman when Richard Clarida’s term ends next January.
Greenlight for Policy Normalization
When it comes to heads of central banks, investors generally prefer continuity which explains why the US dollar instantly jumped higher Monday. After months of uncertainty, investors see Monday’s decision as a greenlight for further policy normalization.
At the beginning of November, the Fed said it will begin to taper asset purchases but over the past week, a growing chorus of central bankers are calling for faster taper or rapid removal of accommodation including Vice Chair Clarida, Governor Waller and Fed President Bullard.
Economic Data
Consumer confidence in the Eurozone has dropped in November for the second successive month as rising COVID-19 cases and higher energy prices in addition to surging inflation dented consumers’ moods and continued to worry citizens, as the Euro hit a 21-month low against the sterling.
The European Commission said Monday that its measure of consumer confidence in the single-currency area decreased to minus 6.8 in November from minus 4.8 in October, the lowest level since April.
Germany’s Bundesbank has warned that inflation could soon approach 6%, and that growth in Europe’s largest economy may faltered this quarter.
Existing Home Sales in the U.S. rose 0.8% in October to a seasonally adjusted annualized rate of 6.34 million units, according to data released by the National Association of Realtors.
Sales were 5.8% lower than they were in October 2020 and the current figure outpaced the originally projected 6.20 million. Sales rose in the more affordable Mid-Western and Southern regions while falling in the Northeast and remaining unchanged in the West, the most expensive region in the country.
As more people continue to get vaccinated and return to everyday life, housing demand remains strong. Realtors are projecting full-year sales of over 6 million, which would be the highest number since 2006.
Other Developments
“Price pressures to subside as life normalizes in 2022,” US Treasury Secretary Janet Yellen said while crossing wires during late Monday night.
The policymaker expected, “Monthly CPI around 0.2% to 0.3% in H2 of 2022.” Earlier, US Treasury Secretary Yellen spoke during a CNBC interview while saying, “Inflation has reached a level that concerns most Americans.”
As a reaction to the comments, investors and traders have the opportunity to consolidate recent gains following the news amid a quiet Asian session on early Tuesday.
Atlanta Fed’s Raphael Bostic said on Monday night interview on Bloomberg TV that faster taper would give the US more optionality, but “we still have a COVID economy, he added.
Given the mixed comments and Wall Street’s latest mild reaction, as S&P 500 Futures printed 0.14% intraday gains following the comments from the Fed official, gold prices paused corrective pullback around $1,809 at the latest.
Gold prices have put in an aggressively retreating move Monday, seemingly driving on the news that Fed Chair Jerome Powell has been reappointed for a second term.
While few would consider Chair Powell as a hawk, the fact that this move has printed so cleanly off of that headline indicates that it has something to do with gold prices falling through the key support level at 1834.
PCE Deflator, FOMC Minutes
Demand for US dollars is expected to be healthy this week with the PCE deflator and FOMC minutes scheduled for release on Wednesday.
Hopes for continued gains in economic activity and employment, on the one hand, are practically at war with inflation and price pressures, on the other hand while policymakers insist that inflation and other negative factors are transitory.
The market will make its own judgement about inflation when the PCE deflator is released. Core PCE is the Fed’s preferred measure of price pressure and it is widely expected to show prices ticking higher.
With the FOMC minutes coming after PCE, investors are likely to focus on the central bank’s economic outlook.
Stronger Dollar
USD/JPY flirted with 115 while EUR/USD dropped to fresh 16 month lows on Monday’s decision. With President Biden’s comments on the economy expected to be mostly positive and US Markit PMIs to edge higher after stronger Empire State and Philadelphia Fed surveys, further gains are likely for the US dollar.
Also Read
Yellen: Not Worried About A 1970s Inflation Replay
Bostic: Fed Should Consider How Fast To Taper
Wonderful Week With Good News for USD
Afternoon Slump Leaves Major US Indexes Lower
Gold Retreats on Powell’s Reappointment News
EUR/GBP Volatility To Hike Ahead Fresh PMIs Data
US T-Yields climb, Start Holiday-Shortened Trade
New Zealand Dollar Falls Below 70
Oil War Continues: OPEC+ To React as Biden Threatens To Tap Reserves
November’s Eurozone Consumer Confidence Deteriorates
October’s US Existing Home Sales Rise
Wall Street, European Stocks Jump on Powell’s Second Term News
Chicago Fed: US Economic Growth Revamped in October
Powell’s Reappointment, No Change of Jockeys in the Middle of Race
