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Overall, market sentiment fluctuated between optimism and concerns, as the US Dollar started the trading day with negative performance. The American currency managed to recover by mid-way, and finally fell closing in the red territory against its major rival currencies.
US Dollar’s slump resulted from US Federal Reserve Chair Jerome Powell’s words. Speaking at the Brookings Institute on the economic outlook, inflation and employment, Powell was mostly dovish. He said it makes sense to moderate the pace of interest rate increases, although he added that the monetary policy would need to remain “restrictive” for some time. Additionally, he said that the time to slow the pace of rate hikes could come as soon as the next meeting in December.
Economic Data
US ADP Employment Change gained major attention as it marked the lowest readings since January 2021 with a 127K figure for November versus 200K forecast and 239K previous readings.
US JOLTS Job Openings for October that eased to 10.334M versus 10.3M expected and 10.687M prior.
On the other hand, the second estimate of the US Gross Domestic Product (GDP) Annualized for the third quarter (Q3) marked 2.9% growth versus 2.6% initial forecasts.
Other Developments
Fed’s Lisa Cook spoke ahead of Powell but aligned with him. She said that inflation data shows some early signs of improvement and that the Fed would likely take smaller steps as it moves forward. Chances of a 50 bps rate hike in December increased from 69.9% ahead of the speech to above 75%.
Powell noted that economic growth has slowed below the long-run trend, which must be maintained. Finally, he said that he does not want to over-tighten and said that cutting rates is not something he intends to do anytime soon.
Earlier in the day, optimism was backed by China’s news and easing coronavirus-related restrictions in Zhengzhou and Guangzhou, despite the government’s strives to control new cases. China has continued to report record daily contagions, but massive protests have forced the decision.
Meanwhile, European inflation fell for the first time in seventeen months, as the Euro Area annual Harmonized Consumer Price Index printed at 10% in October. Also, EU nations are considering lowering Russia’s oil price cap to $60 per barrel, according to people familiar with the matter.
EUR/USD nears the 1.0400 level, while GBP/USD trades around 1.2040. The Australian Dollar was the best performer, as AUD/USD stands at 0.6780. The USD/CAD pair is down to 1.3450, while USD/JPY changes hands at 138.10.
Spot gold trades at fresh weekly highs at around $1,765 a troy ounce, while crude oil prices were marginally higher, and WTI settled at $80.45 a barrel.
On Thursday, the US will publish core PCE inflation, the US Federal Reserve’s favourite gauge, and the October ISM Manufacturing PMI.
Also Read
EUR/GBP rebounds ahead of Germany’s Retail Sales
Gold eying $1,787 ahead of Fed’s favored inflation reading
Wall Street advances on Powell’s dovish signals
Powell’s Speech Drags US Dollar Lower
European markets close higher on Eurozone inflation data
Fed’s Cook: Time nearing to hike rates in smaller steps
US Dollar slides on disappointing jobs data ahead of Powell’s speech
