14.11.2019: Why has USD got stuck at highs? (USDХ, USD/CAD)


Demand for safe haven assets is increasing. Yields of 10-year US Treasuries have settled down below 1.85% while bond prices are going up. Market participants are fretted awaiting details on the date and venue of the meeting where the US and China’s leaders will sign the
first phase trade deal. The US dollar benefits from trade uncertainty. Meanwhile, the Canadian dollar is still trading
lower. The US dollar index is about to approach a
one-month high. The US currency found support from Jerome
Powell’s testimony at Congress. Citing the Fed’s Chairman, the ongoing monetary
policy is appropriate to the current conditions in the US economy. So, Jerome Powell indicated that the central
bank is likely to leave interest rates on hold in the near future. The same message was expressed by Federal
Reserve Bank of Philadelphia President Patrick Harker who voted against a rate cut at the
two latest policy meetings. The US dollar index is trading at about 98.40
with a 1.3% gain since the beginning of November. Macroeconomic data from the US arouses investors’
optimism on the US dollar. Yesterday, traders cheered a consumer price
index which surpassed market expectations. Today, the US Labor Department reported that
the number of continuing claims fell last week, thus confirming Powell’s words about
the healthy job market. Besides, traders are encouraged by factory
inflation in the US. The producer price index rose 1.1% in October
on a yearly basis, better than the forecast for a 0.9% gain. Producer prices rebounded better-than-expected
on month after a fall in September. It proves that factory inflation maintains
momentum, thus justifying a pause in the cycle of monetary easing. Today the Fed’s leader will continue his
testimony at Congress. However, traders do not expect new details
in his speech. So, the second part of the testimony will
hardly spark off a strong response from the market. Meanwhile, the Canadian dollar is getting
weaker against its American counterpart. The USD/CAD pair is trading higher at 1.3266
in the New York session. The loonie is losing ground despite a rally
of oil prices. Today Brent crude climbed above the level
of 63 US dollars a barrel. Interestingly, the US dollar has got stuck
at near a one-month high, though unable to move higher despite upbeat macroeconomic data. Oddly enough, the greenback did not rally
yesterday following the strong US CPI. Perhaps, both the market and the Federal Reserve
shift focus away from inflation and voice more concerns about uncertainty in the global
trade which undermines business confidence and investment.

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