December 5, 2022

Hardwood Paroxysm

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Dollar Remains Quiet as Attention Turns to US Inflation Report

The green dollar remained calm after the erratic market movement on Wednesday and Thursday.

After the upcoming September CPI data from the US Bureau of Labor Statistics, the US DXY is fluctuating in a narrow range of 113.00. US stock index futures were unchanged throughout the day and the 10-year US Treasury yield remained stable at just under 4%. Investors are likely to watch the UK gold bond markets as the Bank of England approaches the scheduled end of its emergency gold bond buying plan.

The annual CPI is expected to fall to 8.1% from 8.3% in August. The CPI, which excludes volatile food and energy prices, is expected to rise to 6.5% from 6.3%. Meanwhile, CME Group’s FedWatch tool shows that markets are trading with an 81.3% chance of a 75 basis point rate hike in November.

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The Bank of England concluded its emergency gold purchase program on Friday. It accepted offers worth 1.96 billion pounds and 2.37 billion pounds to buy Gold indices on Wednesday.

BoE Chief Economist How Bell said an initial policy response was needed in November as the British pound maintained its strength. The GBP/USD pair rose over 150 pips on Wednesday and broke a 5-day losing streak. Meanwhile, Bloomberg reported that Kwasi Quarting, the Chancellor of the Exchequer, will blame the Bank of England if gold yields rise next week. The GBD/USD pair, at the time of writing, is in negative territory at around 1.1070.

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European Investment Bank President Christine Lagarde announced on Wednesday that the debate over quantitative tightening has begun, but that the interest rate remains the main tool of economic policy. The EUR/USD pair struggled to move aggressively in both directions on Wednesday and continues to move sideways towards 0.9700 early Thursday.