Dollar Rises As Sterling Outperforms the Euro’s Weakness

The dollar index has risen to 96.24, just shy of the 96.35 peaks set in July 2020, but has since retreated slightly below the 96.00 level. Rising rates and optimistic sentiment have kept the greenback on the rise, while gold, surprisingly, has maintained its haven appeal, trading around $1,862/oz and acting as an inflation hedge.

The US economy is doing well in the fourth quarter of the year, and news of a new Federal Reserve Chairman appears to be disappearing from the horizon. Yesterday’s unexpected 1.7 percent m/m increase in US retail sales for October suggests that consumption is still high, but these figures are only nominal as rising price pressures persist.

However, as long as inflation worries persist, pressure on the Fed to take a more aggressive approach to taper will likely remain through the end of the year. The USDCHF pair is maintaining above 0.9300, aiming for the long-term limiting trendline drawn from the peak of 1.0235 in April 2019.

The yen is stabilizing around 114.80, but if the dollar continues to strengthen, a move over 115.00 is not out of the question. Building permits in the United States increased to 1.65 million in October, compared to 1.63 million expected, but new housing starts fell short of forecasts at 1.52 million, compared to 1.58 million expected.

After Dollar, Sterling Outperforms Euro Decline

After good economic data from the United States, the US dollar index soared to its highest level since July 2020. The US has released good non-farm payrolls and inflation numbers this month.

The pound sterling remained stable as investors digested a deluge of strong economic data from the United Kingdom. According to data released last week by Nationwide Society, property prices in the United States continued to rise in October. The labor market is tightening, according to data released on Tuesday. The unemployment rate, for example, has dropped to 4.4 percent, the lowest level since the pandemic began.

After hitting a 16-month low of $1.1254, the euro bounced back over the $1.1300 mark. The ECB is unlikely to remove accommodating measures in December, as the bloc’s economy continues to lag behind that of other developed nations such as the United States and the United Kingdom, hampered by the pandemic’s wounds. Higher debt levels in the corporate and governmental sectors, as well as more risk-taking and borrowing, are among the vulnerabilities highlighted by the ECB’s financial stability review.