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Dollar Firms After Fed; Jobless Claims, BoE Meeting

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© Reuters.

Geoffrey Smith 

Investing.com — This week’s dollar high is the highest since the market revises its outlook on global interest rates. On Wednesday, the tapering timeline will be first tested with weekly jobless claims and data on imports. Although the Czech National Bank’s decision to hike interest rates is on the knife edge, the Bank of England will likely follow suit. Stocks are falling but Qualcomm (NASDAQ :), Toyota and Booking, (NASDAQ 🙂 all look strong following impressive results. OPEC will meet with Russia, China and other countries but it is not expected to reduce oil imports much slack by lowering their December production quotas. What you need to know on the financial markets this Thursday, November 4th.

1. Dollar reverses losses after Fed’s dovish tapering message

In response to the Federal Reserve’s modest attempt to normalize its monetary policy on Wednesday, most analysts considered it a small first step. The dollar has now recouped all of the losses that it suffered.

At 6:15 AM ET (1115 GMT), the index that measures the greenback’s performance against a basket advanced-economy currencies had risen 0.4% to 94.265. This is its highest level since this week. The view of analysts that higher interest rates are still possible in the U.S. was more likely than Japan or Europe. Christine Lagarde of the ECB effectively ruled out the possibility of a rate rise next year.

Stock markets in Asia and Europe followed the U.S. higher overnight, comfortable with Fed Chair Jerome Powell’s assurances that the central bank is not “behind the curve” on inflation, even though it expects current supply bottlenecks plaguing the economy to last “well into next year.”

2. Europe: Multispeed tightening of the monetary system

For other central banks, it’s a different picture. Although many expect the Bank of England will raise interest rates, it may not do so since the outbreak of pandemics at its last meeting. The possibility of an economy cooling down could mean the Bank of England keeps policy settings the same. Its decision is due at 8 AM ET.

Norway’s central bank, which has already raised interest rates once, kept its key rate on hold but remains on track to hike again in December, while the Czech National Bank is expected to continue the trend of aggressive interest rate hikes by central European economies when it meets later. After a 75-basis point increase last month, analysts expect an additional 50 basis points hike in the key rate to 2.0%.

Poland’s National Bank had raised its key rate by 75 basis points on Wednesday, a second straight tightening in as many months.

3. Stocks open mixed, Qualcomm and Toyota shining

U.S. stock markets are set to open mixed later after closing at fresh record highs on Wednesday in response to the Fed’s announcement, in which Jerome Powell was at pains to emphasize no acceleration of the timeline for rate hikes.

At 6:20 AM ET they had fallen 20 points (or less than 0.1%) while being up 0.1% and up 0.4%.

On Wednesday, the key 10 year bond yield rose as high as 1.6%, but was back at 1.57%.

Stocks are likely to focus on Qualcomm which saw record-breaking sales for its fourth fiscal quarter due to demand from 5G phones and Toyota which, despite the limitations of the global chip industry overnight, posted records in their results. Book booking and lithium miner Albemarle After Thursday’s better-than-expected earnings, (NYSE:), expect strong start.

4. Trade data and jobless claims highlight economic strength

Powell offered some flexibility to the Fed on Wednesday and said that it could alter the pace at which its bond purchase phase-out is proceeding if necessary. This may be a reference to the weekly data for jobless claims due at 8:30.

Initial claims are expected to edge down to a new post-pandemic low of 275,000, a day after ADP’s private payrolls report for the month through mid-October came in much stronger than expected, showing a net gain of 571,000 jobs. The Institute of Supply Management’s non-manufacturing business survey also showed a clear strengthening of activity in October.

U.S. Trade data is also worth noting. Last month’s numbers showed imports running at historic records ahead of the upcoming holiday season, suggesting consumer demand remains extraordinarily strong.

5. OPEC+ will continue its course

Russia will be represented by the Organization of Petroleum Exporting Countries.

They’re not expected to change their pre-announced plan of a 400,000 barrel a day increase, despite pressure from President Joe Biden and the leaders of other big importers such as India to pump more.

The U.S. Government Inventory Data on Wednesday reinforced the suspicion that rising gasoline prices have already affected demand, with crude oil stocks increasing by more than 3,000,000 barrels.

Futures had risen 1.4% to $82.00/barrel by 6:30 am ET. The price of oil was $83.38/barrel, which is 1.7% higher than the previous day.

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