Biden to speak on inflation and Fed decision

President Joe Biden will give a speech on the economy and combating inflation on Tuesday as markets await his decision on the next Federal Reserve chair and possible moves to bring down U.S. energy prices. For the U.S. central bank, Biden is choosing between Chair Jerome Powell and Fed Governor Lael Brainard, who is viewed as more liberal on climate change and bank regulation. The White House has said Biden will announce his choice before the Thanksgiving holiday on Nov. 25.

Euro suffers as COVID cases surge across Europe

The safe-haven U.S. dollar traded close to a 16-month high to the euro on Monday on growing anxiety over the impact of surging COVID-19 infections in Europe, with Austria reimposing a full lockdown and Germany considering following suit. The greenback was near its strongest since early October against the riskier Australian and Canadian dollars, with the commodity-linked currencies also pressured by a slump in crude oil. The dollar got additional support from bullish comments by Federal Reserve officials Richard Clarida and Christopher Waller on Friday who suggested a faster pace of stimulus tapering may be appropriate amid a quickening recovery and heated inflation. 

US gasoline hits a seven-year high

Inflation has emerged as a political burden for Biden as gasoline prices that Americans pay at the pump hit a seven-year high this month. While blaming OPEC countries for the surge, the administration has said it’s evaluating all tools to quell rising energy prices, including tapping U.S. crude reserves.

The Chinese authorities are urging Chinese banks to help stop the rise of the Yuan. (It is also called the Renminbi but Yuan is easier to say). The US Dollar to Yuan exchange rate is the strongest it has been since June and that was just a dip. Before that, you have to go back to early 2018 to see this pair any lower. Considering China was ground zero for the pandemic, their economic recovery has been remarkable and it has fuelled growth in the Asia/Pacific region but a strong Yuan will slow exports and that also has ramifications in Asia and Australasia.

Things to watch this week

Tuesday at 8.30am – German Flash Manufacturing and Services numbers are released and expecting to see a slight decline (Potentially weaker Euro)

Tuesday at 9.30am – UK Flash Manufacturing and Services numbers are released and expecting to see a slight decline (Potentially weaker for GBP)

Tuesday at 2.45pm – US Flash Manufacturing and Services numbers are released and expecting to see a minor increase (Further strength for USD perhaps)

Wednesday at 1am – NZD Official Cash Rate. We could see RBNZ raise rates from 0.5% to 0.75% (If they do, expect NZD to regain some recently lost ground)

Wednesday from 1.30pm – US Prelim GDP and Core PCE Price Index. Both expecting to be higher meaning more USD strength before the Thanksgiving Holiday.

In summary, if all forecasted numbers are realised, we could see the US Dollar make further inroads against its major counterparts. We’ll be keeping an eye on Biden’s announcement regarding the new Fed Chair – Expect markets to react significantly to the breaking news.

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