Huitong.com November 26th - The US dollar index rose for the third week, but the gains slowed to 0.17%. On Thursday (November 24), it rose to a new high of 102.05 in 14 years, due to market expectations that the Trump administration will Push up inflation and interest rates. Spot gold fell 2% this week, hitting a nine-and-a-half-month low of $1171.22 on Friday (November 25). The increase in oil prices since the beginning of the week has fallen by nearly 1% this week, due to the increased uncertainty of OPEC production.
Next week, the US non-farm payroll report will be ushered in. The foreign media survey expects the number of non-agricultural employment in the US to increase by 180,000 in November. The unemployment rate is expected to remain unchanged at 4.9%.
OPEC will meet on November 30 to coordinate production cuts. Russia, which is not an OPEC oil producer, may also participate, but there are still differences within OPEC about which countries should cut production and reduce production. Most analysts believe that some form of production reduction agreement will be reached, but whether the strength is enough to support oil prices is still uncertain.
[US dollar index soared to a new high of nearly 14 years]
The US dollar index rose for the third week, but the gains slowed to 0.17%, closing at 101.46. On Thursday (November 24), it rose to a new high of 102.05 in 14 years, as the market expects the Trump New Deal to push up inflation and interest rates. And the US economic data is brilliant, all of which lay the groundwork for the December rate hike.
Since Trump was elected president of the United States, the dollar index has risen 4%. Trump's $500 billion infrastructure plan and the trade protectionist policies that will be implemented will put upward pressure on wages and inflation. This pushed up the US bond yield and the Fed’s interest rate hike expectations.
The Federal Reserve’s minutes released on Wednesday also showed that senior Fed officials agreed at the meeting that in an environment of improved job market conditions and rising inflation, it may now be a good time to raise interest rates relatively quickly.
The US economic data released this week has also performed brilliantly. US October durable goods orders initial rate rose 4.8%, the highest level since October 2015; the United States as of November 19, the number of initial jobless claims was 251,000; US November Markit manufacturing PMI initial value rose To 53.9.
According to CME data, traders bet the Fed’s probability of raising interest rates in December soared to 93.5%, after rising to 100%.
Next week, the US non-farm payroll report will be ushered in. The foreign media survey expects the number of non-agricultural employment in the US to increase by 180,000 in November. The unemployment rate is expected to remain unchanged at 4.9%.
Marvin Loh, senior global market strategist at BNYMellon, said that unless the US employment data is bleak next week, others will prompt the Fed to act. Even if the employment data is particularly weak, the impact may be greatly reduced, as the transitional data will be revised.
After the previous surge, along with the fall in US bond yields, the market expects the dollar to adjust in the short term.
However, the market remains optimistic about the future of the dollar. Shaun Osborne, chief currency strategist at Scotiabank, said the dollar's decline was only a correction, or at least a consolidation. He is still optimistic about the medium-term outlook for the US dollar, as interest rates rise and the US economy is expected to grow.
[Most non-US currencies hit the low level and the yen led the decline]
Under the weight of the Fed’s interest rate hike expectations, most non-US currencies have fallen, the euro hit a new low of more than a year and a half against the dollar, the dollar hit a new high of more than eight months against the yen, and the yuan hit an eight-and-a-half-year low against the dollar.
The euro fell to 1.0516 against the dollar on Thursday, the lowest level since March 17, 2015. US President-elect Trump will increase fiscal spending, which may trigger inflation and push up interest rates. The euro has plunged more than 5% against the dollar in the past two weeks.
As Trump wins in the 2016 US election, the trade protectionism and fiscal stimulus he advocates make the call for the euro to fall to parity against the dollar. And European political risk has also become one of the chips that the market bets that the euro will fall to parity.
Despite the short-term corrections, the market is not optimistic about its future trend. Goldman Sachs Group Inc., one of the top trading ideas of 2017, is that the euro will fall to parity in the next 12 months.
The Italian constitutional referendum to be held next month and the 2017 French presidential election may all be factors that trigger the euro's plunge.
USD/JPY hit a new high of 113.89 on Monday for more than eight months, up 2% this week and nearly 10% in the past three weeks , as the Trump New Deal will push up inflation and interest rates, and the Bank of Japan Curve Control" is the target of the monetary policy framework to suppress the yield of Japanese government bonds.
The yuan against the US dollar fell below the 6.92 mark on Monday, hitting an eight-and-a-half-year low of 6.9206 yuan, and offshore renminbi hit a record low of 6.9650.
Traders said that the US dollar index soared, putting a lot of pressure on the renminbi; while the big bank was not on duty at key points, only modest provision of liquidity, indicating that the regulatory level has increased tolerance for exchange rate fluctuations.
[Gold fell below the 1200 mark and fell 2% this week]
Spot gold fell 2% this week, falling below the $1,200 mark. On Friday (November 25), it hit a nine-and-a-half-month low of $117.22 per ounce, as US and US bond yields rose and technical selling also increased. The decline of gold.
The price of gold has fallen more than 8% since the beginning of this month. Compared with the high point touched by the United States on November 9, it has fallen by more than $160, which is a result of the strong dollar and US bond yields.
Omer Esiner, chief market analyst at ommonwealthForeignExchanGE, said the dollar will continue to benefit from expectations that inflation and the Fed may accelerate interest rate hikes.
The economic team of Scotiabank said that the Fed will continue to tighten its policy, and the high end of the Fed rate target range will rise to 2% by the end of 2018.
INTLFCStone analyst Edward Meir pointed out in the report: "In the context of a strong US stock market, a stronger US dollar and rising global interest rates, we expect gold to continue tough."
However, after the price of gold fell to around $1,170, it was supported by low-buy buying and it is expected to stabilize in the short term. On the technical side, gold once fell to around $1,171, basically completing the decline in the entire downtrend channel, and is expected to usher in a rebound in the future.
Since 2011, the lower edge of the downtrend channel is around 1155/65 US dollars. The further downside of the gold price is limited. If it falls below the support level, it may indicate that gold will enter the bear market.
In addition, political risk factors may bring some support to the price of gold. The Italian constitutional referendum, which will be held on December 4, enters the countdown. The latest polls show that Italian voters will oppose constitutional reform. If the constitutional failure fails, the support rate of the populist party “Movimento5Stelle†will increase greatly, and one of the party’s main plans is to promote Italy’s “de-referendumâ€.
In addition, spot silver fell 0.31% this week, falling for the third week, closing at 16.53 US dollars / ounce, Wednesday (November 23) once hit a nine and a half month low of 16.17 US dollars / ounce.
[OPEC reduces production uncertainty, oil price rises]
The increase in oil prices since the beginning of the week has fallen by nearly 1% this week, due to the increased uncertainty of OPEC production. US crude oil futures closed at $45.96 per barrel, and Brent crude oil futures closed at $47.12 per barrel, the lowest closing price in a week.
OPEC sources said that Saudi Arabia told OPEC that Saudi Arabia will not participate in the OPEC and non-OPEC oil-producing countries to discuss the production limit meeting on Monday, because Saudi Arabia hopes to focus on the internal consensus within OPEC.
This caused the oil price to fall by nearly 4% on Friday, and the next day of Thanksgiving, the low market liquidity also increased the market volatility. The oil price on Friday was only half of the usual level.
OPEC will meet on November 30 to coordinate production cuts. Russia, which is not an OPEC oil producer, may also participate, but there are still differences within OPEC about which countries should cut production and reduce production.
Most analysts believe that some form of production reduction agreement will be reached, but whether the strength is enough to support oil prices is still uncertain.
Citigroup said that OPEC can unite to support the market, and its possibility of reaching an agreement is very high; in addition, oil demand is still rising, supply is basically flat, and oil prices are expected to be around US$55 at the end of the year; if oil prices rise, the 55-60 range will allow US crude oil production has increased significantly. At the price of 60 US dollars, the daily output of US crude oil will increase by 5 to 1 million barrels; if there is no geopolitical disaster, oil prices will not return to 100 US dollars.
“It is expected that some form of agreement will be reached, but the oil market reaction will depend on the credibility of the action plan,†US investment bank Jefferies said on Friday, adding that the output of some countries has recently increased to a record level and that significant reductions in production are needed. Boost the price of oil.
Jefferies pointed out that "OPEC production has increased significantly since August, causing the market to resume oversupply, with only a reduction of at least 700,000 barrels per day, or the oil market will be backed up until the second half of 2017."
[What impact will the OPEC meeting have on the market]
Iranian oil minister Zangane has previously pointed out that if OPEC oil-producing countries reach an agreement, oil prices may rebound rapidly to above 50 US dollars; if OPEC and non-OPEC oil-producing countries work together, oil prices may rise to 55 US dollars / barrel.
If OPEC achieves a production reduction agreement, oil prices may rebound to the $55-60 range. However, this upward trend may not last long, because OPEC may not strictly implement the production reduction agreement, which also led to a slower-than-expected progress in the oil market balance.
Kay's macro expectation that the OPEC meeting on November 30 will reaffirm its commitment to maintain production below 33 million barrels per day. During the meeting, it is expected that OPEC will reach an agreement even if it is for the face.
It continues to point out that the agreement cannot be mandatory, so it is unlikely that there will be a significant decline in production after the meeting. The price of US and Brazil at the end of the year is expected to remain at US$45/barrel. The sustainable recovery of oil prices will wait until next year.
If Bank of America Merrill Lynch cuts production below 1 million barrels per day or does not allocate quotas, the price may fall below our expectations; if OPEC does not reach an agreement, oil prices may fall below $40/barrel in the short term.
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