Key Takeaways
- Global markets rebounded on Monday, with major indices like the Dow Jones gaining 2.2% and Nasdaq jumping 2.8%.
- The kiwi currency surged 1.6% following the election, while AUD/USD rose 0.9%.
- The US dollar faced pressure despite a strong jobs report, which increased expectations for a December Federal Reserve rate hike.
- The British pound remains supported after the Bank of England’s rate hike, but falling oil prices may ease inflation concerns.
- Attention shifts to the upcoming US CPI report, which could influence future rate hike expectations and the US dollar’s performance.
Aussie, kiwi recover from recent lows
Global markets recovered strongly on Monday following last week’s sharp sell-off in technology stocks.
The Dow Jones gained 2.2%, the S&P 500 climbed 2.4% and the tech-focused Nasdaq jumped 2.8%.
Currency markets also saw a sharp reversal, with the kiwi leading gains. NZD/USD surged 1.6% following the weekend’s election, while AUD/USD gained 0.9%.
The US dollar remained under pressure in Asia. USD/JPY fell 0.4%, USD/CNH lost 0.1% and USD/SGD dropped 0.3%.
The recovery came despite a stronger-than-expected US jobs report. October payrolls rose by 165,000, more than double expectations for 70,000, while unemployment fell to 4.1% and wage growth accelerated to 3.1%.
The strong result lifted expectations for another Federal Reserve rate hike in December, but improving risk sentiment limited support for the greenback.
Sterling supported after BoE hike
The British pound remains relatively well supported after last week’s Bank of England (BoE) rate hike reinforced the UK’s interest rate advantage.
The BoE raised rates to 4.00%, with policymakers also leaving the door open to another increase in December if inflation pressures remain elevated.
However, falling oil prices have reduced some of the inflation concerns that drove recent rate hike expectations. Brent crude fell around 15% last week, potentially making further tightening less urgent if energy prices continue to retreat.
GBP/USD remains sensitive to broader risk sentiment, while sterling has performed more strongly against the euro. GBP/EUR remains near recent highs, although the pair is increasingly stretched after its recent rally.
US inflation back in focus
Attention now turns to Tuesday’s US CPI report after the strong October jobs numbers reinforced expectations for another Federal Reserve rate hike.
Headline and core CPI are both expected to rise 0.3% m/m. A stronger-than-expected result would reinforce expectations for a December hike and could see the US dollar resume its recent rally.
EUR/USD remains contained around the 1.1150 to 1.1250 range. Last week’s strong US payrolls report helped support the greenback, but falling oil prices and improving risk sentiment have limited further euro losses.
New Zealand political developments are also in focus ahead of the upcoming election, while markets will continue to watch whether the sharp recovery in global technology stocks can be sustained.
Aussie, kiwi recover
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 9 – 14 November
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*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.
