Headlines: Dollar gained against majors as Fed focused on inflation
Main news:
- Today’s focus on the U.S. CPI data
- OPEC rose as OPEC might cut output again in December
Forex outlook:
The dollar rose against most major currencies on Wednesday after a government report showed a surprising rise in New York manufacturing activity eased concerns about an economic slowdown in the U.S. The dollar extended gains against the yen after minutes from the Federal Reserve’s 25 Oct. rate-setting meeting showed the central bank remains focused on inflation. The Fed has kept its benchmark rate at 5.25 percent during its three meetings. The dollar rose to 118.07 from 117.62 after the minutes, traded at $1.2806 per euro from $1.2810.
The British pound fell to its six-week low against the euro after the Bank of England said U.K. inflation will slow sooner than its previous estimated, and signaled that interest rates might not need to rise as high as markets currently expect. Against the euro, the pound dropped to 67.87 pence, its lowest since Sept. 29 from 67.60 pence. It was also at $1.8866 versus the dollar from $1.8959, the lowest this month. Sterling remains soft on the crosses as expectations of a February BOE hike are radically trimmed. A big data day lies ahead today as UK retail sales and US CPI hit the tapes. Retail sales are expected to rebound 0.3% in October while CPI is seen falling 0.3% at the headline level while rising 0.2% at the core. Most moves on the dollar will be limited before its release.
Gold: Gold futures fell 0.2 percent to $623.80 an ounce on Wednesday, as investors took profits and the dollar strengthened after U.S. manufacturing data. Prices have declined 2 percent in four sessions. Now investors are keeping an eye on the dollar, it could be very positive for gold if the U.S. CPI figures come lower than expected as it will make it very difficult for the dollar.
Crude Oil: Crude oil rose 72 cents to $59 a barrel after a U.S. data showed fuel inventories fell, while OPEC’s president said the group might cut output again in December. “Many OPEC countries believe that the market is indeed very soft so we might cut production. I have the feeling that the general sentiment is for another cut,” OPEC president Edmund Daukoru said on Wednesday. Crude oil has been trading in the $58 - $62 range bound prices since early October. Lower volatility and rangebound trading has led some speculators to pull out and look for bigger returns elsewhere such as gold.
