Dollar extends rally, markets await UK inflation data, Fedspeak

Here is what you need to know on Wednesday, November 17:

The greenback continues to gather strength against its major rivals mid-week with the US Dollar Index climbing above 96.00 for the first time in 16 months. The upbeat Retail Sales data from the US and rising US Treasury bond yields on inflation fears helped the dollar outperform its rivals. Investors await October inflation data from the UK and the EU. Housing Starts and Building Permits from the US will be looked upon for fresh impetus in the second half of the day. Several FOMC policymakers will be delivering speeches during the American trading hours as well.

The benchmark 10-year US Treasury bond yield advanced to its highest level in three weeks at 1.65% earlier in the day and stays relatively quiet during the European trading hours. Wall STreet’s main indexes posted modest daily gains and US stocks futures indexes are moving sideways. 

St. Louis Fed President James Bullard called for the FOMC to turn “more hawkish” in the upcoming meetings, arguing that would smooth out the policy normalization process. On a dovish note, San Francisco Fed President Mary Daly said the Fed should stay patient when it comes to hiking its policy rate to battle high inflation.

EUR/USD fell below 1.1300 for the first time since July 2020 during the Asian session on Wednesday. Meanwhile, Germany suspended the approval of the Nord Stream 2 project and natural gas prices shot up in Europe, further weighing on the shared currency. Eurostat is expected to report that the Consumer Price Index (CPI) was up 4.1% on a yearly basis in October.

GBP/USD manages to hold above 1.3400 as investors await the UK CPI inflation data, which could ramp up the probability of the Bank of England hiking its policy rate by 20 basis points in December. 

UK CPI Preview: Buy the rumour, sell the fact? Three scenarios for GBP/USD.

USD/JPY registered impressive gains on the back of rising US T-bond yields and broad dollar strength on Tuesday. Currently, the pair is trading at its strongest level since March 2017 and closing in on 115.00.

Gold reached fresh multi-month highs near $1,880 on Tuesday but lost its traction during the American trading hours. Since the hot CPI report from the US, gold had been capitalizing on inflation fears but the precious metal seems to be struggling to continue to find demand amid rising US T-bond yields. XAU/USD is currently fluctuating in a tight range above $1,850.

Cryptocurrencies: Bitcoin lost more than 5% on Tuesday and trades below the key $60,000 mark on Wednesday. India is reportedly looking to ban transactions in crypto and China renews efforts to clamp down on mining activities. Ethereum closed the fifth straight day in the negative territory on Tuesday and lost more than 10% during the period. ETH/USD is staying under bearish pressure on Wednesday and approaches $4,000.