We saw choppy and mixed price action to start the week as traders set aside recent Chinese debt crisis and pandemic concerns, eagerly anticipating fresh inflation data and more clues on potential policy moves from central bank officials this week. So the broad market action didn’t really kick off until Wednesday, where we got another stronger-than-forecast inflation read from the U.S. and commentary from the Federal Reserve meeting minutes that a taper was likely coming before the end of the year.
Now, rising inflation and monetary policy tightening headlines have normally drawn in broad risk aversion behavior, but it looks like the different major asset classes were marching to their own beat after Wednesday’s top tier events. Gold popped higher (likely on the strong inflation data and dip in Treasury bond yields/U.S. dollar), equities started their move higher (possibly more influenced by strong earnings reports), while oil began it’s second move higher (likely on IEA’s bullish oil demand growth forecast and Saudi Arabia dismissing of calls for additional supplies).
Crypto was in its own world as well, lead higher mainly by week-long speculation of an imminent bitcoin futures ETF approval in the U.S. There’s no official approval yet announced from the SEC, but ProShares updated their prospectus for a Monday launch, indicating that they may have already gotten the green light from the SEC. We’ll just have to wait-and-see what Monday brings, but whatever the case may be, this development was enough to send bitcoin ripping higher to break the $60K handle before the weekend.
As for the forex space, the major pairs essentially traded as-if it was a pure risk-on kinda week. The comdolls dominated the safe havens, with the Kiwi & Aussie leading the way higher despite the lack of any major bullish catalysts from New Zealand and Australia.
The British pound was a strong relative performer as well, likely finding support on rising speculation that the Bank of England is ready to hike rate soon. And as usual for this type of environment, the Japanese yen and U.S. dollar were the biggest losers of the week.
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Every day, I will present to you my findings and daily commentaries on what recently happened in the economic arena, possible shifts in sentiment, economic events to watch out for, and their effects on currencies.