USD, JPY, and CHF Lower, Rising Investor Confidence Boosts Euro

In today’s tranquil markets, the USD, JPY, and CHF all fell modestly. The Euro is bolstered by better-than-expected market mood data, while the Sterling improves as well. The Eurozone Sentix Investor Confidence Index rose from 16.9 to 18.3 in November, slightly lower than the expected 18.6. This is also the first rise since July. However, the current conditions index fell from 26.3 to 23.5, the lowest since June. On the other hand, it is expected to rise from 8.0 to 13.3.

Sentix said that the economic slowdown is “coming to an end.” Economic expectations indicate that the recent decline is only a “mid-cycle slowdown.” “This argument seems to be confirmed by the November data. Therefore, the threat of an economic upturn is out of the scope of discussion.” In Switzerland, the unemployment rate fell from 2.8% to 2.7% in October, in line with expectations.

In the summary of opinions from the October 27-28 meeting of the Bank of Japan, it was pointed out that due to low inflation, even if suppressed demand increases, it is necessary to adhere to an extremely loose monetary policy. “In addition, the Bank of Japan should “adhere to the current monetary easing policy” so that “increasing corporate profits lead to rising wages and strengthening the virtuous cycle from income to expenditure.”

To “mitigate the effects of deteriorating terms of trade”, it is necessary to improve economic activities and raise inflation expectations so that “companies can smoothly transmit the increase in raw material prices to domestic sales prices.” The important thing is to “narrow the output gap” to “facilitate the transmission of price increases.”

USD, Yen Retreats in Calm Markets

The depreciation of the JPY reflects “the difference in inflation rates and monetary policy stances among economies.” It is important to consider the impact of rising international commodity prices and the depreciation of the JPY. However, it is necessary to remember that their impact on each economic entity varies by industry and size.

The USD gave up some positions on a calm Monday. At the beginning of the week, China reported a record trade surplus, but import growth was Lower than expected, and oil and soybean purchases fell significantly.

Several Fed policymakers have spoken on different events, although monetary policy is rarely mentioned. Vice-Chairman Richard Clarida said that the benchmark for rate hikes may be reached by the end of 2022, but added that the Fed is still “some distance” from considering raising interest rates, adding that he expects to fully return USD to pre-pandemic employment Level to the end of 2022.