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Will U.S. Dollar Trot Ahead To Turkey Day?

By Kathy LienForexNov 23, 2021 04:58PM ET
www.investing.com/analysis/will--us-dollar-trot-ahead-to-turkey-day-200609313
Will U.S. Dollar Trot Ahead To Turkey Day?
By Kathy Lien   |  Nov 23, 2021 04:58PM ET
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The U.S dollar rose to 4.5-year highs against the Japanese Yen and to 16-month highs against the euro today as Treasury yields extended their gains. With Federal Reserve Chairman Jerome Powell’s renomination, investors doubled down on tightening next year. Some market participants are looking for as many as three quarter-point hikes. We don’t think the Fed will be that aggressive, but if inflation fails to ease, it may have to respond quickly.  Atlanta Fed President Raphael Bostic joined the chorus of policy-makers calling for faster tapering yesterday. He suggested that reducing asset purchases more aggressively at the onset gives them the option to raise interest rates sooner. 
 
The pace of taper and timing of rate hikes will be on everyone’s minds tomorrow with the release of the personal consumption expenditure price index. The PCE deflator, the Fed’s preferred inflation gauge, is expected to rise. Although an increase is widely anticipated, pre-holiday trade could lead to exaggerated moves in the U.S. dollar. Wednesday will be a busy data day because U.S. markets are closed on Thursday for the Thanksgiving holiday and will close early on Friday. Aside from PCE, revisions to second-quarter GDP and the November University of Michigan Consumer Sentiment index are due for release, along with personal income, spending and new home sales. The Fed will also release the minutes from its last policy meeting. The outcome of most of these reports should be U.S. dollar positive and, on a lower liquidity day like Wednesday, we would not be surprised to see good data drive USD/JPY and EUR/USD to fresh lows. 
 
The biggest story today was the U.S. government’s decision to release strategic oil reserves in an attempt to ease gas prices. This was a coordinated announcement made with China, Japan, U.K., India and South Korea. Unfortunately, it failed to drive prices lower as oil ended the day up 2% because the announcement was widely expected and modest at best. The Canadian dollar recovered earlier losses to end the day lower. 
 
The Reserve Bank of New Zealand’s monetary policy announcement is the main focus tonight. In October, the RBNZ became one of the first major central banks to raise interest rates. Later today, it is expected to tighten again. New COVID-19 cases remain very high, with little improvement, but the country has opted to end pandemic curbs and live with COVID. The RBNZ needs to act because inflation is at its highest level in 19 years, the housing market remains strong and the labor market is tight. With investors waffling between a 25bp and 50bp rate hike (market is pricing in a 40% chance of a half-point move), NZD is destined for big moves this evening. 
 
The euro ended the day higher against the U.S. dollar following stronger-than-expected PMIs. Manufacturing and service sector activity accelerated in the month of November, but the impact on EUR/USD was limited because rising COVID-19 cases raises concerns about future growth. Cases are now rising in France and Belgium, which announced mandatory work-from-home four days a week. Tighter restrictions in Germany are inevitable with the worsening pandemic. U.K. PMI numbers were mixed, with manufacturing activity improving but service sector activity slowed. It drove sterling lower against the U.S. dollar on Tuesday.
Will U.S. Dollar Trot Ahead To Turkey Day?
 

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Will U.S. Dollar Trot Ahead To Turkey Day?

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Comments (7)
Jayson Maldonado
Jayson Maldonado Nov 24, 2021 4:54AM ET
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👌
leehiung chong
leehiung chong Nov 23, 2021 9:51PM ET
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why do people always think interest rates hikes is the obvious solutions to rising inflation? Lockdown have caused much disruptions to economics and instead of fixing those disruption why make cost higher to business and consumers to borrow This Do anyone think raising rates can make things better ?
Yeminn Aung
Yeminn Aung Nov 23, 2021 9:51PM ET
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However, Interest rate is one of the best monetary tools to adjust inflation.
Yeminn Aung
Yeminn Aung Nov 23, 2021 9:51PM ET
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However, controlling interest rates is one of the best monetary tools to adjust inflation risk.
Colonel Omo
Colonel Omo Nov 23, 2021 6:37PM ET
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Only interest in the european union, middle east, Bitcoin and ship financial market.
Jayson Maldonado
Jayson Maldonado Nov 23, 2021 5:31PM ET
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oi ya
Qadeer Butt
Qadeer Butt Nov 23, 2021 5:31PM ET
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Mehmet Dutlu
Mehmet Dutlu Nov 23, 2021 4:41PM ET
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the title is also referring to Turkeys currency which plunged 10% today.
Kaya Karakaya
Kaya Karakaya Nov 23, 2021 4:41PM ET
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Strong anti-Erdogan sentiment to influence voting in 2023.
Santos Brian
Santos Brian Nov 23, 2021 4:34PM ET
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I need pipis please
Chris Poulos
Chris Poulos Nov 23, 2021 4:34PM ET
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me too!
Miriam Morkhul
Miriam Morkhul Nov 23, 2021 4:27PM ET
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Please refrain from such offensive headlines such as "Turkey Day". We give thanks to God and contemplate our blessings and responsibilities on Thanksgiving, it's not a pagan turkey animal slaying ritual day.
Chris Poulos
Chris Poulos Nov 23, 2021 4:27PM ET
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i prefer to contemplate my navel ...
 
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