Forex Today: Central bank speakers in the limelight

Eren Sengezer FXStreet

Here is what you need to know on Monday, November 8:

The US Dollar Index pulled away from the 2021-high it set at 94.62 on Friday but managed to close the second straight week in the positive territory, supported by the upbeat October jobs report. In the absence of high-tier macroeconomic data releases, markets started the new week in a quiet manner and investors will keep a close eye on central bank speakers on Monday. FOMC Chairman Jerome Powell will deliver the opening remarks at a virtual conference titled 'Gender and the Economy Conference'. New York Federal Reserve President John Williams, Fed Vice Chair Richard Clarida, Fed Governor Bowman and Bank of England (BoE) Governor Andrew Bailey will also be speaking later in the day.

On Friday, the US Bureau of Labor Statistics announced that Nonfarm Payrolls (NFP) rose by 531,000 in October, surpassing the market expectation of 425,000. Wall Street's main indexes finished the week at new all-time highs but US stock index futures are losing between 0.15% and 0.35% in the early European session on Monday. Meanwhile, the 10-year US Treasury bond yield, which lost nearly 10% in the second half of the week, is trying to stage a rebound toward 1.5%. Late Friday, US Democrats passed a $1 trillion infrastructure bill.

EUR/USD seems to have gone into a consolidation phase a little above mid-1.1500s after dropping toward 1.1500 on Thursday. Sentix Investor Confidence for November will be featured in the European economic docket.

GBP/USD suffered heavy losses following the BoE's decision to leave its policy rate unchanged last week. In an interview with Bloomberg TV, Governor Bailey said that it's not their job to guide financial markets on interest rates. With the BoE event out of the way, investors will shift their attention to headlines surrounding Brexit talks.

USD/JPY edged lower amid falling US T-bond yields in the second half of the previous week and stays relatively quiet around mid-113.00s on Monday. The Bank of Japan's 'Summary of Opinions' of its October policy meeting showed that the recent JPY weakness was a reflection of the differential in inflation, monetary policy stance between Japan and other countries.

Gold capitalized on falling US T-bond yields and broke above several key resistance levels to end the week at its strongest level since early September near $1,820. XAU/USD looks to extend its rally as technical indicators point to a bullish shift in the near-term outlook.

Cryptocurrencies: Following a two-week consolidation phase above $60,000, Bitcoin regained its traction and broke above $65,000 on Monday. The all-time high for BTC sits at $67,000. Ethereum preserves its bullish momentum at the start of the week and trades above $4,700.

Author

Eren Sengezer

FXStreet

As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.

AUD/USD holds above 0.6950 as bullish USD caps gains

AUD/USD edges lower during the Asian session on Tuesday, stalling a two-day recovery move from a two-month low, touched last week. An extended rout in the fixed income market keeps US bond yields elevated near multi-year highs. This, along with geopolitical uncertainties, helps the US Dollar retain its bullish tone despite receding October Fed hike bets. However, expectations for another RBA rate hike this month could act as a tailwind for the Aussie.

USD/JPY rises back above 158.00 despite hawkish BoJ outlook

USD/JPY rises back above 158.00 in the early European morning on Tuesday. The pair strengthens as the Japanese Yen fails to find any inspiration from hawkish BoJ expectations and looming intervention risks. Meanwhile, geopolitical uncertainty and elevated US bond yields keep the US Dollar near its YTD high despite receding October Fed hike bets. This, in turn, helps the pair stay supported.

Gold recovers further from two-month low amid some USD profit-taking

Gold builds on its modest intraday bounce from the $4,100 neighborhood, or a two-month low, and climbs above $4,150 during the first half of the European session. The US Dollar pauses for a breather following the recent strong rally from the September monthly swing low and offers some support to the precious metal. Adding to this, receding bets on an October Fed rate hike benefit the non-yielding bullion.

Ripple and Stellar weaken as derivatives positioning fades

Ripple (XRP) and Stellar (XLM) face pressure trading below $1.499 and $0.220, respectively, on Tuesday after a modest correction at the start of the week. Traders should be cautious as weakening derivatives metrics and fading bullish momentum suggest further corrections for XRP and XLM. Derivatives data shows a weakening and cautious signal among traders.

Europe in focus as French and Spanish politics drive sentiment

There are no tier-1 releases today. Focus will remain on developments in the European markets and geopolitical developments in the Middle East. In France, the key issue in the coming days will be whether the Socialists and Marine Le Pen's National Rally signal they are willing to topple the government over the budget.

Eurozone inflation just hit 3.8%, its highest in three years. This chart shows why the ECB can’t simply hike its way out

The ECB would normally have a relatively straightforward answer to inflation running almost twice its target: raise interest rates. But these are not normal circumstances. This time, the bond market is already doing part of the tightening for it, leaving the ECB facing an increasingly difficult dilemma.