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Good day at the office for the U.S. Dollar, CPI data in the spotlight - Market Overview

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Miguel A. Rodriguez
Miguel A. Rodriguez
05 November 2022
The dollar strengthens at the beginning of the session on Wednesday in a market where inflation fears have increased substantially.

This is the main debate among investors after the employment figures showed a growth rate much lower than expected, leading to the ruling out of the reduction in asset purchases, at least in the medium term. The New York Federal Reserve inflation expectations data also contributed to this outcome, increasing to 3.4%.

Commodities on the uptrend.

Today the commodity markets continue to rise, with copper near record highs. In Asia, iron ore and coal hit new highs too. All the factors come together to encourage inflationary expectations in an economic scenario where both central banks and governments have flooded the market with liquidity through fiscal aid stimulus measures, zero interest rates, and asset purchase programs.

Today the CPI data in the United States is scheduled for publishing. The figures are expected to rise to 3.6% year-on-year.

About Bonds.

The yields of the North American bonds are gradually rising with the 10-year benchmark above 1.60%. Still, perhaps more significant are the performances of the European bonds leading the way before the European Central Bank and the Bank of England statements.

The yield on the German 10-year BUND is already approaching positive levels, clocking at 0.16%, after having climbed more than 50 bps in the last quarter. In terms of price, it has fallen to a wide support zone that is around 169.20. The selling pressure of fixed income continues to be present globally.

The rise in interest rates in Europe due to the expectations of an early start for the withdrawal of stimulus policies from the ECB is supporting the euro. Under these circumstances, the EUR/USD pair managed to overcome the downtrend line, opening the way to new advances and only finds a resistance level in the zone of 1.2180.

Due to advances in the rate of vaccination in Europe and the lifting of mobility restriction measures, Germany lifted the quarantine for vaccinated travellers. This also contributed to better economic recovery expectations, offering extra support for the EUR.

Sources: investing.com, reuters.com.

This information/research prepared by Miguel A. Rodriguez does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. The research analyst primarily responsible for the content of this research report, in part or in whole, certifies that the views about the companies and their securities expressed in this report accurately reflect his/her personal views and consequently any person acting on it does so entirely at their own risk.The research provided does not constitute the views of KW Investments Ltd nor is it an invitation to invest with KW Investments Ltd. The research analyst also certifies that no part of his/her compensation was, is, or will be, directly, or indirectly, related to specific recommendations or views expressed in this report.The research analyst in not employed by KW Investments Ltd. You are encouraged to seek advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit that conforms to your specific investment objectives, financial situation, or particular financial needs before making a commitment to invest. The laws of the Republic of Seychelles shall govern any claim relating to or arising from the contents of the information/ research provided. 

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Miguel A. Rodriguez
Miguel A. Rodriguez
Financial Writer

Miguel worked for major financial institutions such as Banco Santander, and Banco Central-Hispano. He is a published author of currency trading books.