Beware Of The Dollar Bulls


After some surprising weakness in the US Dollar over the past fortnight despite the probability of a first Fed rate hike in nearly a decade steadily increasing, today we have finally seen a resurgence in the Buck.

Ever since the most recent Non-farm payrolls report removed the last significant hurdle that had to be cleared for Fed liftoff with another 200k+ print, the Greenback has lost ground against nearly all its major crosses. 

This afternoon we had the inflation data for the US in November  which showed an increase on the previous print, with core inflation of 2.0% now in line with the Fed mandate. This mornings UK CPI number marked a return to inflationary territory for the first time in 4 months. 

The other main data release of this Afternoon’s session came in the form of the 2 weekly Global Dairy Trade (GDT) auction results . The headline figure for overall prices rose by 1.9%, lower than the previous reading of 3.6% but still marking a second successive result of increasing prices after suffering 3 consecutive releases showing falling prices.

It’s been quite a remarkable turnaround for European Bourses today, after several days of selling of late. The Eurostoxx 50 (+3.06%) lead the way gaining 96 ticks from yesterday’s close. The Dax (+2.84%) and FTSE (+2.39%) also enjoyed strong gains with the UK blue-chip index ending the session back above the big psychological level of 6000 at 6014.21. Across the pond the US markets are in a seemingly Bullish mood as their central bank looks poised to raise rates tomorrow evening. 

Oil markets are enjoying an up-day for the first time in over a week with both WTI (+1.54%) and Brent (+0.92%) posting gains at the time of writing. As the European session drew to a close, its crude benchmark Brent was trading at $38.27, up 35 cents on the day. Gold (-0.29%) was lower due to the strengthening dollar, trading $1060.30/oz at the time of writing.
In the currency space the EURUSD (-0.61%) is on course for it’s lowest close in five and currently trades at 1.0925. AUDUSD (-0.86%) and GBPUSD (-0.57%) are also down as the Buck strengthens across the board.

Looking forward tomorrow brings what most market participants would deem the most important event left before year-end with the FOMC meeting concluding at 19:00 GMT. With markets widely discounting a 25 basis point increase in the interest rate, a lot of focus will be on the accompanying statement and following press conference for clues as to the future path of monetary tightening.