The world of currencies is in flux, with the US dollar experiencing a weak performance and the sterling emerging as a top performer. The USD Index has reached a two-and-a-half month low, signaling its weakest performance in a year. The euro and pound have also weakened against the dollar, while the yen has traded lower despite weak Japanese data. However, sterling has remained steady near a two-month high, driven by an improved economic outlook and comments from officials at the Bank of England. The pound is on track for its largest monthly gain in a year, aided by a falling US dollar. The Australian dollar and the New Zealand dollar have also been strong, supported by hawkish central bank minutes and rallies in key commodities.
Traders are closely watching major currency pairs, with the EUR/USD pair trading above 1.0900 and the GBP/USD pair retracing recent losses. The USD/CHF pair has experienced minor losses, primarily due to a relatively muted session during the Thanksgiving holiday.
Economic cues are playing a crucial role in shaping the currency market. Traders are eagerly awaiting the release of November's preliminary PMIs, which could impact the USD price dynamics and provide a clearer picture of the US economy. The interpretation of US economic data is causing divergence between currencies and stocks, with investors eagerly awaiting the release of manufacturing and services PMI data. The market may see potential breakouts if the data surpasses recent benchmarks or maintains levels above significant psychological thresholds. The cooling labor market and anticipation of interest rate cuts could influence currency valuations and investor strategies. Key upcoming events include the release of German, Eurozone, and UK PMI data, as well as Canada's wholesale sales figures.
The US Dollar's descent is a reflection of the current economic climate and the impact of monetary policy on global markets. The Federal Reserve's rate decision and new economic projections in December will be crucial for determining the future direction of the markets.
In addition to the currency market, the Middle East conflict is seen as a background risk, with the temporary truce having a marginal impact on risk sentiment and the US dollar. The release of hostages by Hamas and the release of Palestinian prisoners by Israel are also mentioned.
The article also highlights the positive economic data in the UK, the commitment to a tighter monetary policy by the Bank of England, and the impact of commodity prices on the Australian dollar. Technical analysis is provided for various currency pairs and commodities.
Amundi, a prominent asset management company, recently made a bearish call on the British pound. However, an opinion article from Bloomberg argues that Amundi's analysis misses the point. The author believes that Amundi's bearish call fails to consider the potential positive factors that could support the pound, such as the UK's successful vaccination campaign and the possibility of a post-Brexit trade deal with the US. The article also mentions that Amundi's call is based on technical analysis, which the author considers unreliable. The author concludes that while the pound may face challenges, it is premature to be overly bearish on the currency.
It is important to note the risks associated with trading financial instruments and cryptocurrencies.