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Forex Today: US Dollar extends recovery to start holiday-shortened week

Here is what you need to know on Monday, November 21:

After having closed the last two trading days of the previous week in positive territory, the US Dollar Index started the new week on a bullish note and climbed to a fresh 10-day high above 107.50. The risk-averse market environment helps the US Dollar (USD) preserve its strength early Monday as the benchmark 10-year US Treasury bond yield holds steady at around 3.8%. Later in the session, the Federal Reserve Bank of Chicago's National Activity Index for October will be the only data featured in the US economic docket. Investors will continue to pay close attention to comments from central bankers.

On Saturday, Atlanta Federal Reserve President Raphael Bostic said he was ready to move away from a 75 basis points (bps) rate hike at the last policy meeting of the year. These comments, however, failed to influence the market pricing of the next Federal Reserve (Fed) rate hike. According to the CME Group's FedWatch Tool, the probability of a 50 bps rate increase in December stands at 80%, virtually unchanged from last week. 

Meanwhile, optimism about China moving away from the zero-Covid policy continues to fade. Over the weekend, China reported Covid deaths for the first time since May. Additionally, several districts in Beijing shut schools amid the rising number of cases while Guangzhou ordered a five-day lockdown of its Baiyun district. Hong Kong's Hang Seng Index was last seen losing nearly 2% on the day and the Shanghai Composite Index was down 0.5%. Reflecting the souring market mood, US stock index futures are down between 0.3% and 0.4%.

Pressured by the renewed USD strength, EURUSD broke below 1.0300 and extended its slide toward 1.0250 early Monday. On Friday, "As the stance of monetary policy tightens further, it will become more likely that the pace of increases will slow," European Central Bank (ECB) policymaker Klaas Knot said.

GBPUSD registered modest gains last week but started the new week on the back foot. At the time of press, the pair was pushing lower toward 1.1800, losing more than 0.5% on the day.

After failing to make a decisive move in either direction last week, USDJPY gained traction during the Asian trading hours on Monday and climbed toward 141.00. The Japanese cabinet has compiled a spending plan worth 29 trillion Japanese Yen (USD207.37 billion), backed by new debt of about 23 trillion Japanese Yen. Japanese Finance Minister Shunichi Suzuki said that the government will guide economic and fiscal policy in a "responsible" manner.

Gold price extended its slide early Monday and broke below $1,750 following Friday's sharp decline. Concerning coronavirus news from China seem to be weighing on XAUUSD at the beginning of the week. 

Bitcoin came under renewed selling pressure on Sunday and lost more than 2%. BTCUSD continues to edge lower toward $16,000 in the early European morning. Ethereum broke below $1,200 on Sunday and fell over 6%. ETHUSD was last seen losing more than 1% on the day at around $1,100.

Author

Eren Sengezer

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.

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