EUR/USD rises on hawkish Lagarde comments – Daily Market Brief, November 29, 2022

EUR/USD is rising towards 1.04 after ECB President Lagarde hinted towards more interest rate hikes. She suggested that inflation may have yet to peak.

·         Asian stocks jump on optimism that zero-Covid measures could be eased

·         Fed speakers gave mixed messages suggesting rates still need to rise but could be cut next year

·         German CPI is forecast to cool to 11.3% from 11.6%

Global stocks fell steeply on Monday as China’s Covid unrest unnerved the market. Apple was a notable underperformer amid worries of a hit to iPhone production after a report that iPhone production could face a 10% shortfall as protests continue to disrupt operations at major supplier Foxconn.

Today, the market mood has improved, and global indices are heading for a stronger start, led by a rebound in Chinese stocks.

Shares in Hong Kong and China rallied overnight on optimism that the protests could help accelerate a move away from zero-COVID policies. Chinese government health officials are due to speak shortly. The Hang Seng trades 4% higher, and Chinese stocks rallied 3.5%. Volatility will likely remain while investors assess any new direction in measure or policy.

Fed speakers

Investors continue to digest the mixed messages from Fed speakers. New York Fed President John Williams said that more work needed to be done to tame inflation, indicating a 50 basis point hike in December. However, he also saw the US central bank cutting interest rates next year.

Meanwhile, hawk St Louis Federal Reserve President James Bullard said that the market was underestimating how high interest rates could rise.

The USD finished yesterday on higher ground. However, the USD index trades -0.4% lower at the time of writing.

ECB Lagarde

It wasn’t just Fed officials out in force yesterday; ECB President Lagarde also warned that inflation in the eurozone may not have peaked yet, hinting at more interest rate rises to come. Her comments were in line with those from Netherlands ECB governing council member Klaas Knot and Pablo Hernandez from Spain.

These comments come as investors speculate over whether the ECB will slow the pace of rate hikes in the December meeting to 50 basis points from 75. The hawkish tone suggests that this may not be the case. That said, there do appear to be some tentative signs that inflation is easing.

German PPI cooled significantly more than expected in October to 34.5%, down from 42.5%. Today German flash CPI is expected to fall from the record-high level of 11.6% to 11.3%.

EUR/USD is trading +0.4% at 1.0370, while the DAX is also rebounding from yesterday’s 1% drop and is set to open 0.4% higher.

Oil

Oil prices rebounded from the 2021 low of 73.15 hit yesterday and have rallied 3% at the time of writing. Speculation is rising that OPEC+, which is set to meet on 4th December to discuss output, could cut production again, owing to demand concerns in China and concerns over slowing global growth. The group cut production by 2 million barrels per day at the October meeting, a move that briefly sent oil prices back to $100 per barrel.

Disclaimer: This article is not investment advice or an investment recommendation and should not be considered as such. The information above is not an invitation to trade and it does not guarantee or predict future performance. The investor is solely responsible for the risk of their decisions. The analysis and commentary presented do not include any consideration of your personal investment objectives, financial circumstances, or needs.

Sources: Bloomberg, CNBC, Reuters

Original article provided by Trading Writers

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