Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your experience. Save up to 40% More details

Powell Renomination Turbocharges Dollar, Sinks Gold

By XM Group (Trading Point )Market OverviewNov 23, 2021 05:19AM ET
Powell Renomination Turbocharges Dollar, Sinks Gold
By XM Group (Trading Point )   |  Nov 23, 2021 05:19AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
  • Dollar charges higher as Fed chief Powell gets a second term
  • Stock markets pull back from record peaks, gold cracks
  • European PMIs pause euro’s slide, RBNZ rate decision next

Powell gives dollar more fuel

The White House announced yesterday that Jerome Powell will get a second term as Fed Chair, while Lael Brainard will be promoted to Vice Chair. Even though the decision was as expected, the news still caught markets by storm, propelling the dollar higher as traders doubled down on bets for faster tightening.

Markets have now fully priced in three rate hikes for next year starting in June.
For that to happen, the Fed would need to accelerate the pace of tapering, something that senior officials including current Vice Chair Clarida have indicated they are open to. This will probably be a hot topic at the December FOMC meeting.

It is becoming clearer that the Fed can no longer afford to be patient. Inflation is scorching hot, consumption is booming, the labor market seems tight by several metrics, business surveys point to a powerful spell of growth ahead, and Congress is about to bring more spending to the party.

With the prospect of accelerated tapering in play, the dollar could continue to rule over the FX arena, especially while the euro grapples with new lockdowns. But with the Fed now ‘fully priced’, the risk is the US virus situation. If restrictions return to America too, the reserve currency might lose some of its shine as markets revert back to pricing two rate hikes for next year.

Stocks shiver but don’t break

The market reaction reflected the view that Powell is likely to step on the policy brakes harder than Brainard. Yields spiked higher across the curve, with short-term rates rising faster, which cooled inflation expectations a little.

Equity markets didn’t enjoy this cocktail.
It was a classic case of rising rates making stocks less attractive, with unprofitable or ‘richly valued’ shares taking the sharpest hit as higher yields decrease the present value of their future cash flows. As such, the tech-heavy Nasdaq lost more than 1%.

To be fair though, stocks have been remarkably resilient considering just how much central bank tightening has been priced into bond markets.
This is likely a testament to the unstoppable force of corporate buybacks, which are headed for a record year.

Gold cracks, PMIs rescue euro

Gold was the biggest victim of the Fed leadership news, suffering at the hands of rising real yields and a rampaging dollar, with some large option expiries scheduled for today likely adding fuel to the selloff. Bullion’s fate now hangs on whether the Fed will speed up tapering, which in turn will depend on the virus trajectory in America.

The euro got some much-needed relief after the latest Eurozone PMIs pointed to a slight improvement in business activity. However, these surveys were mostly conducted before the new wave of covid restrictions rocked Europe, so next month’s data are unlikely to be so cheerful. Markets are still pricing some chances of a minor ECB rate hike next year. That's quite unrealistic and a repricing could spell more pain for the battered euro.

Finally, PMI surveys will also be released in the UK and America today. Beyond those, the spotlight will fall on the Reserve Bank of New Zealand, which concludes its meeting at 01:00 GMT Wednesday. A rate increase is almost certain as the nation’s economy is on steroids - the real question is whether it will be a ‘single’ or a ‘double’ hike.

Powell Renomination Turbocharges Dollar, Sinks Gold

Related Articles

Powell Renomination Turbocharges Dollar, Sinks Gold

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
Sign up with Email