Forex news for North American trading on November 22, 2021:
- Powell to be re-nominated as Fed chair
- Biden: I trust Powell's independence
- Yellen: We do have to be concerned about inflation
- Sen. Warren says she will vote against Powell's renomination
- US October existing home sales 6.34m vs 6.18m expected
- US sells 5-year notes at 1.319% vs 1.309% WI
- U.S. Treasury auctions off $58B of two year notes at high yield 0.623% vs WI level of 0.612%
- OPEC+ may adjust plans if nations oil reserves are released
- Eurozone consumer confidence -6.8 vs -5.5 estimate. EURUSD remains lower with sellers in control.
- ECB's Kazaks: If supply side shocks pressure wages, we should act
- Chicago Fed October national activity index +0.76 vs -0.13
Markets:
- Gold down $40 to $1804
- US 10-year yields up 9.4 bps to 1.63%
- WTI crude oil up 65-cents to $76.58
- S&P 500 down 15 points to 4683
- Nasdaq -1.0%
- USD leads, JPY lags
Headlines in Asia began to flag the risk of a Fed decision before reports came that it was imminent. Powell got the nod and the reaction was substantial as the US dollar rallied and yields pushed significantly higher. The thinking is that he's more likely to raise rates that Brainard.
USD/JPY climbed to 114.70 initially from 114.10 and then continued to grind up to 114.90 late. There was a brief pullback midway through trading as equities slumped and that was repeated again late in the day as the S&P 500 turned a 30 point gain into a loss at the close.
The 'risk off' mood only compounded the losses for commodity currencies. NZD/USD fell 60 pips to 0.6950 in steady selling from 0.7010 before the Powell announcement. New Zealand earlier announced a shift to a 'living with covid' model but that wasn't a market mover. USD/CAD rose to the highest since the end of September, cresting above 1.27 as the US continues to bandy around the idea of an SPR release, with the latest rumour suggesting it will be tomorrow. Despite that, oil was higher.
The euro and cable traced out new lows below last week's worst levels. The Powell announcement broke Friday's lows and there were few bottom fishermen. The new low in the euro is 1.1231.... is it too soon to talk about parity?
In any case, it's great to be back after a week in London. I appreciated the weak GBP and the streets were certainly quieter than pre-pandemic. The pubs though were curiously still full though. Cable finished at 1.3388.
Lost in all the gyrations was that the yen was the weakest performer today. So despite some of the hawkish worries and hiccups, the signal is still for rate divergence and towards better sentiment (or only towards inflation?).
