Health experts around the world are worried about Omicron but investors are not – at least, that’s what the 2% rally in stocks and rebound in the U.S. dollar suggests.
What makes today’s announcement so important is the timing. The COVID-19 Omicron variant is a serious risk that many scientists are still struggling to understand.
The U.S dollar rose to 4.5 year highs against the Japanese Yen and 16 month highs against the euro today as Treasury yields extended their gains.
The Dollar soared against all of the major currencies after President Biden officially renominated Jerome Powell as Federal Reserve Chairman.
Investors bought U.S. dollars after retail sales rose for the third month in a row. The increase in demand was widely anticipated but the increase in overall spending along with spending ex autos beat expectations. This means that while higher prices certainly played a role in the gains, consumers were not discouraged by price hikes to spend more on electronics, sporting goods, books and musical instruments. Spending at clothing stores declined modestly from the previous month but that will change in November and December with holiday shopping. Economists expect a strong holiday season with many retailers starting sales extra early this year in anticipation of shipping delays.
Euro dropped to its weakest level since June 2020 because the European Central Bank is one of the most dovish central banks.
Oil continues to hover near multi year highs with yesterday’s surprise inventory draw numbers only adding to the bullish posture of the market. Although the Biden administration has made several attempts to jawbone the price of oil lower, first by appealing to OPEC to increase production and them hinting that it may release some stockpiles from the SPR reserve most analysts believe that crude and the whole hydrocarbon complex will at very minimum remain steadily bid for the foreseeable future.
The simultaneous decline in currencies and Treasury yields confirms our view that investors are growing concerned ab
The U.S. dollar traded lower against all of the major currencies on Monday despite a good jobs report and a rise in Treasury yields.
Once the dust settled, the dollar ended the day virtually unchanged (slightly lower) from its pre-FOMC levels against other the major currencies. Stocks and bond yields ended higher which should benefit the Yen crosses.
A precise end date for QE will be positive for the dollar, although it could also be calculated by the amount of bond purchases cut per month.
EUR/USD logged its best day in 5 months as US GDP overshadowed the European Central Bank’s monetary policy announcement.