Forex

The expectation that global inflation has peaked and the Fed's rate hikes have slowed has contributed to the dollar's weakness and equities market gains last month.

Investors' thoughts were preoccupied at the early November with persistent fears about inflation and additional central bank tightening. Indeed, central banks increased the policy rate dramatically once more. Policy rates were hiked 75 basis points (bps) by the Fe) and BoE, respectively, to 4.0% and 3.0%.

The revelation of the US inflation figures for October, however, greatly lifted investor mood despite challenges from tighter monetary policy in November. The market expects that US inflation has peaked and may turn out to be less sticky than previously feared because the 7.7% year-on-year (y/y) rise was below consensus estimates.

Since late September, the DXY index has been declining, which measures the dollar's value against a balanced basket of six different currencies. Although the world's most crucial reserve currency remains more than 10% for the year, November had the most significant monthly fall (- 5.11%) since September 2010.

In addition to lower pricing pressures, reports from the housing and manufacturing sectors have shown that the overall economy is experiencing stronger headwinds. This has increased the number of obstacles to further front-loading radical policy tightening.

Euro has outperformed the dollar by more than 5% but has fallen behind several of its most significant peers. The single currency has benefited from increased fiscal assistance from governments, cheaper gas prices, and a pleasant fall. A second tailwind is a more gradual ECB rate hike, which was made possible by the recent significant inflation miss.

AUD/USD gets up bids to extend the fourth-week rebound and refresh the intraday high near the 0.6700 level. The Australian dollar ignores Beijing, Canberra's biggest client, and unimpressive activity statistics from Australia's monthly inflation figures.

Australia's CPI decreased from 7.4% predicted to 6.9% YoY from 7.3% before. The inflation data supports the Reserve Bank of Australia's (RBA) dovish view, which may resist the Aussie Dollar from returning uptrend in the following month.

China's policymakers unveiled 20 proposals to loosen Covid restrictions on November 11. The quarantine period was reduced from ten to eight days, and secondary contacts were no longer subject to quarantine. The campaign to vaccinate more senior citizens and expectations for a less stringent Covid policy moving ahead were met with a highly positive response from Asian equities markets, despite some more limitations being implemented toward the month's end.

China's economic figures generally shocked on the low side. Retail sales were down 0.5% y/y, imports were down 0.7% y/y, and the composite PMI was weaker than anticipated, all of which point to slower development. The monetary policy was loosened, and the real estate industry received some assistance. Over the course of the month, Asian stocks rose 18.8%.

Commodities

The oil market's sentiment is still critical, and November’s events in China won't change that. As Covid instances in China continue to rise, some localities have tightened their limits on movement.

We should receive some estimates of OPEC members' November production levels in the upcoming month. This will, without a doubt, give important information about which members have reduced production following the most current OPEC+ supply constraints. OPEC+ decided to reduce their production targets by 2MMbbls/d beginning in November and back in October.

The market will, however, likely pay close attention to this week's developments on the price ceiling. Last week, EU members failed to agree on the price cap for Russian oil. The EU and G- 7 will work to strike a deal this week before the EU limitation on Russian crude oil delivered through waterways come into effect on December 5. The Commission suggested establishing the limit at EUR275/MWh, which some countries believe is too high.

The Bahia Blanca Grain Exchange's most recent crop tour data indicates that drought and frost conditions would result in a 31% YoY decline in wheat production in southern Buenos Aires and La Pampa, Argentina. According to the poll, the region will harvest around 3.7 million tons (mt) of wheat starting next month, down from 5.3 million tons the year before. The barley production in the area is predicted to decrease by 20% YoY to 2.3mt.

Indices

Finally, the DAX reached our target. Thus, we are now negative. The German stock index climbed by 21% in just one and a half months despite the recession still being in effect. This more than doubles the S&P 500's annual return average. A strong bullish momentum drove the market higher when the DAX broke the trend line.

The Nasdaq-100 has gained 0.7% over the last week of October while the Dow Jones has increased 4.6%. And this momentum difference might persist as long as the monetary authorities continue to control inflation rather than driving it higher as they have been doing since 2009.

The DAX filled weekly and daily gaps, which surged to levels, not since June. The stock index temporarily halted at level 14,440, possibly forming a top. Another negative movement is also highly anticipated, according to bearish divergences. Although there is a solid bullish trendline, the DAX will likely decline.

After the US inflation figures, the S&P 500 also increased by 5%, but it would only go a little further. This American stock index, which supports the present bear market, is in danger unless it exceeds the trend line. Recently, the S&P 500 bridged the gap and reacted positively to its 200-day exponential moving average (EMA).

A downward movement is also quite likely, according to a bearish divergence. As the year finishes, volatility may be lower, so traders might anticipate consolidation between 3,900 and 4,000. However, if the index declines and the negative warning is confirmed, the S&P 500 may move even further than it did – perhaps as far as 3230.

Market Events

In the Eurozone, where the CPI is over 10% annually, inflation is pervasive and still quite high. This all-time high far exceeds the ECB's 2% objective. The weakening euro had made energy prices even more expensive. However, recent declines in the price of energy and the exchange rate of USD/EUR have raised hopes that maximal inflation has been reached. However, a recession appears inevitable. However, even if interest rates are significantly down, the ECB will still need to raise them.

The largest economy in the world expanded at an annualized rate of 2.6% in Q3, exceeding expectations for an expansion of 2.4% and ending the negative growth of the last two consecutive quarters. The US has fared better than some other parts of the world, but the economy is in for a rough ride because of rising signs that the consumer is faltering under high inflation and interest rate increases.