The dollar is rising as a result of Powell’s re-election, and bets on a hawkish Fed are increasing.

Economic World News :

The dollar remained higher in Asia on Tuesday morning, remaining at a four-and-a-half-year high against the yen. The selection of incumbent US Federal Reserve Chair Jerome Powell to a second term fueled betting that the US will raise interest rates faster than predicted.

The US Dollar Index Futures, which monitors the greenback against a basket of other currencies, had risen 0.03 % to 96.573. 

The USD/JPY exchange rate rose 0.22 % to 115.11. The greenback reached the previous week’s high of 114.97 yen, the highest level since March 2017. Japan’s markets are closed for the Christmas season.

The AUD/USD pair fell 0.03 % to 0.7220. The NZD/USD pair fell 0.38 % to 0.6929 ahead of the Reserve Bank of New Zealand’s policy decision on Wednesday.

The USD/CNY pair rose 0.02 % to 6.3854, while the GBP/USD pair fell 0.05 % to 1.3390.

Investors were also digesting US President Joe Biden’s selection of Powell to lead the Fed against Lael Brainard which is  , the more left leaning of the two, was appointed as Fed vice-chair.

Powell’s re-election strengthened market expectations of interest rate hikes in 2022, when the Fed’s asset-tapping program concludes. Currency markets have recently been influenced by market bets on the speed of central banks’ asset reduction and interest rate hikes.

“Powell’s nomination for a second term will provide markets confidence that the Fed will begin raising interest rates in July 2022. At least three Fed officials have now publicly suggested speeding up asset tapering “Analysts at Westpac stated in a note.

According to Fed Bank of Atlanta President Raphael Bostic, the US central bank may need to accelerate the removal of monetary assistance in reaction to strong employment gains and increasing inflation, which could result in a faster-than-expected interest rate hike.

The number of COVID-19 cases on the continent is increasing, with Austria on complete lockdown since Monday and Germany mulling more stringent restrictions. The euro was trading at $1.124, close to a 16-month low. It has dropped 2.8 % so far in November, which has been exacerbated by the European Central Bank’s recent dovish tone.

Commodities News :

Gold rose in Asia on Tuesday morning, but it stayed near its lowest level in more than two weeks. After US President Joe Biden appointed current Federal Reserve Chairman Jerome Powell for a second term, bets for faster-than-expected interest rate hikes rose.

Gold futures rose 0.11 % to $1,808.03, after falling 2.1 % to its lowest level since November 5 on Monday. The dollar, which generally moves in the opposite direction of gold, rose slightly on Tuesday and remained close to a 16-month high.

Powell was nominated for a second four-year term by Biden on Monday, over Lael Brainard, who was appointed to Fed vice-chair. Both Powell and Brainard’s positions will require Senate confirmation.

However, investors are keeping an eye on the growing number of COVID-19 cases in Europe, and the Bank of France Governor Francois Villeroy de Galhau stated on Monday that the recurrence of cases and rising inflation will not influence the Bank of France’s intention to begin asset tapering in March 2022.

Other precious metals rose 0.4 %, with silver and platinum up 0.4 % and palladium up 1.3 %.

Important news that could affect the Economic Markets Today :
  • German Manufacturing PMI (Nov)  
  • Composite PMI (Oct)  (UK)
  • Manufacturing PMI (Oct)  (UK)
  • Services PMI (Oct)  (UK)
  • Manufacturing PMI (Nov)  (USA)
  • Services PMI (Nov)  (USA)
  • RBNZ Interest Rate Decision

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