GemForex - weekly analysis

The week is off to a relatively slow start, and as we do not get many quiet weeks these days, this may turn out to be one of the few, with the US Thanksgiving bank holiday cutting the week short. 

On the first two days of the week, there are no notable data releases on either side of the Atlantic. The Federal Reserve's policymakers are scheduled to speak on Wednesday before the preliminary PMIs for manufacturing and services in the United States and the United Kingdom. But on Wednesday, all eyes will be on the Federal Reserve minutes.

The US Dollar Index began the new week on a strong note and soared to a new 10-day high over 107.50 after having completed the final two trading days of the previous week in positive territory. Raphael Bostic, president of the Atlanta Federal Reserve, stated on Saturday that he was prepared to back away from a rate increase of 75 basis points (bps) at the last policy meeting of the year.

Policymakers seem eager to emphasize that one instance of inflation does not constitute a pattern and that other evidence will be required to support a slower rate of tightening. Due to the Fed's continued hawkish comments over the past week or two, the rebound bounce has stopped. Additionally, the US Retail Sales data that was reported on Thursday exceeded expectations, casting doubt on the idea that inflation has peaked and raising the possibility that the Fed is still far from stopping its cycle of tightening policies. The FOMC's monetary policy meeting minutes, which are due on Wednesday, will so continue to be the center of attention.

On similar tone from Europe, the EURUSD fell below 1.0300 early on Monday and continued to drop near 1.0250, pressured by the resurgent USD strength. Discussions about a more aggressive tightening of ECB policy might strengthen the common currency and limit the downside for the EURUSD pair. The odds were increased by ECB President Christine Lagarde's remarks on Friday, in which she stated that the bank is dedicated to speedy medium-term inflation reduction to 2%. Lagarde noted that in order to rein in pricing pressures, the ECB will need to keep hiking interest rates.

Although GBPUSD had moderate gains the previous week, it got off to a rough start this week. At the time of writing, the pair had lost more than 0.5% on the day and was moving near 1.1800. On Thursday, amid the publication of the United Kingdom CBI Industrial Order Expectations data and the US Thanksgiving vacation, a group of Bank of England policymakers will amuse Pound Sterling traders. A rather busy week will end with a data-dry Friday for both economies.

Meanwhile, in Asia, hope for China abandoning its zero-Covid policy is dwindling. China reported Covid deaths over the weekend for the first time since May. In addition, a number of Beijing districts closed their schools in response to the increase in cases, while the Baiyun area of Guangzhou was placed under a five-day lockdown. The Shanghai Composite Index was down 0.5% while the Hang Seng Index of Hong Kong had lost over 2% of its value for the day.

On the opposite side of the East China Sea, the Japanese Yen gained momentum on Monday during Asian trading hours and surged near 141.00 after failing to make a clear move in either way the previous week. A spending plan of 29 trillion Japanese Yen (USD207.37 billion) has been developed by the Japanese government and is supported by around 23 trillion Japanese Yen in new debt. According to Japanese Finance Minister Shunichi Suzuki, the government would conduct its fiscal and economic planning in a “responsible” manner.

As investors continue to book additional profit from the recent rise, gold prices are retreating further from their recent highs amid a revived USD strength. Since the price of the precious metal has been unable to rise beyond 1,800, it is clear that strong resistance at this level is preventing further price growth.

Finally, BTC and Ethereum had another difficult weekend. Regarding FTX's obligations, more information has been made public, and market participants are still keenly aware of any FTX news. The potential for another domino effect worries traders, but for the time being, it appears like the worst is at least partially over. The price of BTC will continue to be determined by the strength of the dollar and the unfavorable FTX fresh flow for the next days. Happy new week!