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Uncertainty Behind Volatile US Session
Risk-aversion is increasingly becoming a key word in the market context. The US dollar firstly fell but changed course during US trading hours to reach weekly highs against most major rival currencies.
Concerns around the coronavirus pandemic rotated during the first half of the day, with the focus on the newest COVID-19 variant.
A debate has been launched as the University of Oxford noted that there’s no evidence on vaccines’ inability to provide some protection against it, despite Moderna’s CEO’s comments, about vaccine efficacy, which throw heavy shades on economic recovery and threaten supply chain, one of the main reasons behind skyrocketing inflation.
Economic Data
The Chicago PMI fell to 61.8 in November from 68.4 in the prior month. It is the lowest reading since February. Expectations were for a 69% reading. Tomorrow, the Institute of supply management will release its national PMI index. Expectations are for a 61 reading following 60.8 in October.
Other Developments
US showdown is looming again as Congress returns to the thorny issue facing urgent deadlines to avoid debt ceiling limit default.
Failure to reach agreement on funding bills or debt ceiling would profoundly impact the country and Biden’s Administration, while failure to agree on a final form of the USD 2 trillion House-passed Build Back Better bill will be good news.
Former US President Donald Trump, on Tuesday, urged Senate Republicans to use the federal debt limit as leverage to defeat President Biden’s social spending and climate bill.
Treasury Secretary Janet Yellen on Monday warned senators that failing to reach a deal on raising the debt limit could “eviscerate” the recovery of the U.S. economy.
US Treasury yields were sharply lower, weighing on the American currency. US Federal Reserve Chair Jerome Powell testified on the CARES act before the Senate Banking Committee and surprised investors as well as traders with his words.
Firstly, Powell, for the first time, suggested to stop using the term ‘transitory’ when describing inflation.
“Risk of more persistent inflation has risen,” Powell said. He also noted that it is appropriate to talk about speeding up tapering in the upcoming December meeting.
Investors and traders rushed to the Dollar, helping yields to bounce from their intraday lows. The Euro is among the best performers against the dollar, now trading at around 1.1310. GBP/USD, on the other hand, it retreated to a fresh 2021 low of 1.3194 while AUD/USD traded as low as 0.7062.
The Dollar posted gains versus the CAD, with the pair now hovering around 1.2800. The Dollar’s late recovery left safe-haven currencies pretty much flat versus the USD on a daily basis.
Gold plummeted after briefly advancing beyond 1,800, now trading at $1,775 a troy ounce. Crude oil prices also fell, with WTI at $66.00 a barrel, while Wall Street came under strong selling pressure, with all indexes closing in the red.
