The US Dollar index is heading lower during early Thursday
The US Dollar index is heading lower during early Thursday trading. However, the American currency is likely to remain supported in the runup to the end of the year due to expectations that the Fed will increase the pace of tapering and set firmer expectations for rate hikes in 2022. The likelihood of action from the Fed increased after the release of US inflation numbers last week and retail sales on Tuesday, both of which surprised to the upside. While other central banks also find it increasingly difficult to ignore the growing threat of escalating consumer prices, none more than the Bank of England following the release of surprisingly high CPI figures on Wednesday, it is still the Fed that remains under the spotlight; a scenario that creates scope for further dollar gains.
Ricardo Evangelista – Senior analyst, ActivTrades
Stock markets were mixed on Thursday’s open following the bearish trend started overnight in Asia and led down by tech shares. Inflation worries continue to weigh on market sentiment today as investors digest the potential threat to the economic recovery brought by a faster-than-expected hawkish switch from central Banks (with the Fed particularly in focus) to tackle mounting pressure coming from rising prices. This uncertain situation is visible on most charts as the medium-term bullish trends are slowing down on a number of riskier assets as investors reduce their exposure following recent records. Inflation and the actions taken by central banks are likely to remain the major market drivers for some more time, which could reduce directionality and increase market volatility in the short-term. Investors will have more clarity once President Biden nominates the new Fed chairman in the coming days. Even if there is no huge difference between the two candidates in terms of monetary policy, Lael Brainard is seen as slightly more dovish than Jerome Powell. Her nomination could then temper hawkish shift expectations and keep the “risk-on” trading stance for more time yet.
Pierre Veyret– Technical analyst, ActivTrades
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