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The US Dollar Index closed the second straight day in the positive territory and continues to inch higher on Wednesday but markets are likely to remain quiet ahead of the New Year holiday.
Omicron stands as a downside risk in the housing market. A reading of pending home sales also out Wednesday showed an unexpected drop in November, and while that data largely predated Omicron’s ascendance in the United States, the highly contagious new variant could further limit home sales in the near term, the US National Association of Realtors said.
Economic Data
Later on Wednesday, November data on Pending Home Sales and Goods Trade Balance was released. The U.S. trade deficit in goods mushroomed to the widest ever in November as imports of consumer goods shot to a record ahead of the second straight COVID-distorted holiday shopping season along with industrial supplies, while exports slipped after a historic gain a month earlier.
The goods trade gap reported Wednesday by the Commerce Department is likely to remain historically high as long as the coronavirus pandemic continues.
The goods trade deficit widened last month by 17.5% to $97.8 billion from $83.2 billion in October, Census Bureau data showed. That exceeds the previous record deficit set in September of $97 billion and may damp optimism that trade might finally add to U.S. economic growth this quarter for the first time in more than a year.
Imports rose by 4.7% with industrial supplies leading the way with an increase of $5.7 billion to $63.2 billion, followed by consumer goods rising by $2.9 billion to just shy of $67 billion as retailers rushed to fill store shelves ahead of Christmas. Both were record highs.
The US Energy and Information Administration reported that oil inventories fell in the last week. Oil stockpiles fell by 3.6 million barrels, from 3.1 million estimated by analysts. However, US crude oil production increased to its highest level since May 2020, up to 11.8 million barrels, the highest in 19 months.
Other Developments
Bitcoin lost more than 6% and broke below $50,000 on Tuesday before going into a consolidation phase around $48,000. Ethereum also suffered heavy losses and fell below $4,000 after managing to hold above that level in the previous five days.
Wall Street’s main indexes closed mixed on Tuesday and US stocks futures indexes are posting modest gains in the early European session. The 10-year US Treasury bond yield continues to move sideways in a narrow range below 1.5%.
The US, the UK, France, Greece and Portugal all registered record-high one-day increases in new coronavirus cases on Tuesday but this development doesn’t seem to be having a significant impact on risk sentiment. Reports continue to suggest that the Omicron variant is less severe than the Delta variant.
EUR/USD is testing 1.1300 after closing in the negative territory on Tuesday as the dollar’s market valuation continues to drive the pair’s movements.
GBP/USD turned south after touching its highest level in five weeks at 1.3463 on Tuesday. The pair is currently posting small losses around 1.3420.
USD/JPY preserves its bullish momentum and stays within a touching distance of 115.00 early Wednesday.
Gold climbed to its strongest level since late November at $1,820 on Tuesday but made a sharp U-turn. XAU/USD is edging lower toward $1,800 in the European morning.
