Dollar on the back foot, eyes on EU sentiment, US PPI data and central bank speakers

The greenback stayed under modest bearish pressure on Monday and weakened against its rivals with the risk-positive market environment making it difficult for the currency to find demand. The US Dollar Index continues to push lower early Tuesday and trades below 94.00 for the first time since the Fed’s policy announcements last week. The ZEW sentiment survey for the euro area and Germany will be watched closely by market participants ahead of the Producer Price Index (PPI) data from the US. Meanwhile, several central bankers, including ECB President Lagarde, BoE President Bailey and Fed Chairman Powell, will be delivering speeches later in the day.

Macro events: On Monday, the data from the euro area showed that the Sentix Investor Confidence improved to 18.3 in November from 16.9 in October. The ZEW Survey Economic Sentiment Index is expected to edge lower both in the euro area and in Germany in November.

European Central Bank (ECB) chief economist Philip Lane reiterated on Monday that inflation dynamics in the medium term are still weak in the euro area. On the other hand, St. Louis Federal Reserve President James Bullard told Fox Business Network that he is expecting the Fed to hike its policy rate twice in 2022. Meanwhile, Bloomberg reported that US President Biden has interviewed Lael Brainard for the next Fed Chair. Commenting on that matter, “I expect a lot of continuity in Fed policy no matter how the Fed Chair appointment process works out,” Bullard said.

Wall Street’s main indexes finished the first day of the week modestly higher and US stock index futures are down between 0.3% and 0.2% in the early European session on Tuesday. The benchmark 10-year US Treasury bond yield edged higher on Monday but lost its traction after failing to reclaim 1.5%.

EUR/USD closed in the positive territory on Monday and is closing in on the static resistance area that seems to have formed around 1.1620.

GBP/USD staged a decisive recovery at the start of the week and stays relatively quiet above 1.3550 area on Tuesday. Unresolved issues surrounding Brexit’s Northern Ireland protocol could limit the pair’s upside.

USD/JPY fell below 113.00 amid falling US Treasury bond yields and touched its lowest level in nearly a month. The cautious market mood seems to be helping the JPY outperform its rivals.

Gold built on the strong gains it posted in the second half of the previous week and reached its highest level since early September at $1,826. Currently, XAU/USD fluctuates in a tight range above $1,820, awaiting the next catalyst.

Cryptocurrencies: Bitcoin preserved its bullish momentum and hit another record high on Tuesday. Currently, BTC is trading within a touching distance of $70,000. Ethereum is approaching $5,000.

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