Forex news for North American trading on November 22, 2021:
- Gold drops from $ 40 to $ 1,804
- US 10-year yields up 9.4bp to 1.63%
- WTI crude oil up 65 cents to $ 76.58
- S&P 500 down 15 points to 4,683
- Nasdaq -1.0%
- USD leads, JPY lags
Headlines in Asia began to signal the risk of a Fed move before reports said it was imminent. Powell got the nod and the reaction was substantial as the US dollar rallied and yields rose significantly. The idea is that he’s more likely to raise rates than Brainard.
USD / JPY climbed to 114.70 initially from 114.10, then continued to climb to 114.90 ultimately. There was a brief pullback midway through as stocks crashed and it repeated again late in the day as the S&P 500 turned a 30 point gain into a loss at the close.
The “risk-free” mood only worsened the losses in commodity currencies. The NZD / USD fell 60 pips to 0.6950 during regular selling of 0.7010 ahead of Powell’s announcement. New Zealand earlier announced a shift to a “live with covid” model, but it was not a market driver. USD / CAD hit its highest level since late September, breaking above 1.27 as the US continues to discuss the idea of an SPR release, with the latest rumor suggesting it will be tomorrow. Despite this, the oil was higher.
The euro and cable have drawn new lows below the worst levels of last week. Powell’s announcement broke Friday’s lows and there were few bottom anglers. The new low of the euro is at 1.1231 … is it too early to talk about parity?
Anyway, it’s great to be back after a week in London. I appreciated the weakness of the GBP and the streets were certainly quieter than before the pandemic. The pubs were, however, curiously still full. Cable terminated at 1.3388.
Lost in all the gyrations is that the yen was the weakest performer today. So, despite some hawkish worries and hiccups, the signal is still for rate divergence and better sentiment (or just inflation?).