- The Trump trade adds another leg in the US Dollar, heading into its fifth day of gains.
- All eyes are on Fed Chairman Powell and his view on the interest rate cut in December.
- The US Dollar index jumps to a fresh year-to-date high at around 107.00.
The US Dollar (USD) sets forth its Trump trade rally for the fifth consecutive trading day with the US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, reaching the highest level seen since November 1, 2023, above 107.00. The additional push comes after major news agencies reported on Wednesday evening that the Republicans had secured enough seats for a majority in the House of Representatives after already winning the Senate. Thus, The “Red Sweep” has materialized, and President-elect Donald Trump will face very few issues or struggles to get any package through both political decision bodies.
The US economic calendar includes the weekly Initial Jobless Claims and the Producer Price Index (PPI) inflation data for October. No big shakeups there after PPI numbers came in a touch higher, roughly in line with US October Consumer Price Index (CPI) economist expectations from Wednesday. Instead, expect some nervousness from Federal Reserve (Fed) Chairman Jerome Powell’s speech after several Fed members questioned this week whether a December rate cut is still valid under current market conditions.
Daily digest market movers: Is this it?
- Macroeconomic data for this Thursday has been published:
- Weekly Initial Jobless Claims for the week ending on November 8 came in lower than expected at 217,000 where an uptick to 223,000 was expected.
- The Producer Price Index (PPI) data for October came in a touch higher than expected:
- The monthly headline PPI was in line of expectations at 0.2% against the 0.1% from last month. Core PPI was in line of the survey as well, coming in at 0.3%, from 0.2% previously.
- The yearly headline PPI accelerated to 2.4%, surpassing the 2.3% expectation and higher than the 1.9% from last month. Yearly Core PPI jumped to 3.1%, above the 3.0% expectation and higher than the previous 2.9%.
- Three Federal Reserve members and the Fed Chairman itself are set to speak this Thursday:
- At 12:00 GMT, Federal Reserve Governor Adriana Kugler (2024 FOMC voting member) delivers a speech about central bank independence and economic outlook at the Latin American and Caribbean Economic Association 2024 meeting in Montevideo, Uruguay.
- Richmond Fed President Tom Barkin discusses the economy with Jodie W. McLean, secretary of the Real Estate Roundtable board of directors at around 14:00 GMT.
- At 20:00 GMT, Federal Reserve Chair Jerome Powell participates in a panel discussion titled "Global Perspectives" about the economic outlook at an event hosted by the Federal Reserve Bank of Dallas.
- New York Fed President John Williams closes off this Thursday by delivering keynote remarks on "Intermediating Impact: Making Missing Markets" at a New York Fed event at 21:15 GMT.
- Equities are having issues to hold on to gains. Europe is able to do so while US futures are marginally turning flat to negative.
- The CME FedWatch Tool is pricing in another 25 basis points (bps) rate cut by the Fed at the December 18 meeting by 82.5%. A 17.5% chance is for rates to remain unchanged. While the rate-cut scenario is the most probable, traders have pared back some of the rate-cut bets compared with a week ago.
- The US 10-year benchmark rate trades at 4.47%, just off the high printed at opening at 4.48%.
US Dollar Index Technical Analysis: Up or down?
The US Dollar Index (DXY) extends gains this week after President-elect Donald Trump will have his presidency with full support from the Senate and the House of Representatives after Republicans secured enough seats. The only element now in the balance is whether December will still have a rate cut, while everything else known is priced in for now.
From now on, the 107.00 round level comes into play for the rest of the week. A fresh year-to-date high has already been printed. A full one-year high could be reached once 107.35 gets taken out.
On the downside, a fresh set of support is coming live. The first support is 105.89, the closing level on Tuesday. A touch lower, the pivotal 105.53 (April 11 high) should avoid any downturns towards 104.00 for now.
US Dollar Index: Daily Chart
Risk sentiment FAQs
In the world of financial jargon the two widely used terms “risk-on” and “risk off'' refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.
Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.
The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.
The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD hovers around 1.0530 after mixed US data
EUR/USD bounced from a fresh 2024 low at 1.0495, but gains were modest ahead of US data releases. Initial Jobless Claims beat expectations, but wholesale-level inflation was hotter than anticipated. Demand for the US Dollar prevails despite overbought conditions.
GBP/USD depressed around 1.2650 on relentless US Dollar buying
GBP/USD is holding losses while flirting with multi-month lows near 1.2650 in the early American session. The pair remains vulnerable amid a broadly firmer US Dollar and softer risk tone even as BoE policymakers stick to a cautious stance on policy. Speeches from Powell and Bailey are eyed.
Gold depressed around $2,550 and at risk of falling further
Gold consolidates at two-month lows as the prevalent demand for the US dollar overshadows that for the safe-haven metal in a risk-averse environment. Central bank leaders' speeches stand out in the American session.
XRP struggles near $0.7440, could still sustain rally after Robinhood listing
Ripple's XRP is trading near $0.6900, down nearly 3% on Wednesday, as declining open interest could extend its price correction. However, other on-chain metrics point to a long-term bullish setup.
Trump vs CPI
US CPI for October was exactly in line with expectations. The headline rate of CPI rose to 2.6% YoY from 2.4% YoY in September. The core rate remained steady at 3.3%. The detail of the report shows that the shelter index rose by 0.4% on the month, which accounted for 50% of the increase in all items on a monthly basis.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.