The United States dollar index or it is also known as DXY weakened in New York session trading last night. It was as a number of Fed officials stressed the need to scale back the next rate hike.
When this news was written in the Asian session (November 23/23), Dixie was still slumped in the 107.10s range. Besides that, the Greenback tended to be defensive against most major currencies
Cleveland Fed President Loretta Mester told CNBC that inflation is still too high. That is why; monetary tightening could only be stopped after the central bank witnessed a further decline in the rate of inflation.
However, he thinks that the scale of the next rate hike needs to be reduced. This was as the economic conditions have begun to be restrictive.
Some Statements Influenced the Market Anticipation
Mester's opinion is in line with Fed Chairman Jerome Powell's remarks earlier this month. Powell at the time said that it is certainly that interest rates need to rise even higher.
The aim is in to achieve the inflation target, But the central bank will need to raise interest rates on a smaller scale in the future. The statements influenced market anticipation.
It is especially ahead of the release of the FOMC meeting minutes later in the evening. Markets now believe the minutes will contain info about a slowdown in the "Fed rate hike" rate.
That is more reasonable instead of the aggressive hawkish stance it once was. The anticipation was one of the factors that silenced the US dollar this morning.
Risk Sentiment is Increasing
Carol Kong of the Commonwealth Bank of Australia also revealed that there was also an improvement in risk sentiment that triggered a rally in stocks and bonds.
People should thanks to better corporate financial reports just like what Carol said lately. Meanwhile, the US dollar lost support from safe haven buying interest related to the scourge of the pandemic in China.
Chinese authorities continue to tighten restrictions on people's activities in a number of major cities due to a surge in COVID-19 cases. However, market concerns over the impact of the issue have eased for now.
The imposition of new restrictions in that country in the near future will inevitably have a negative economic impact. That is why; market participants have to be ready for that.
Pullback Can Happen on This Situation
However, at least the market for now seems focused on something. It is a fact that China wants to gradually shift towards a strategy of coexisting with COVID in the medium term.
That was said by Rodrigo Catrill, currency strategist at National Australia Bank. He said further that it’s just that, People think that a pullback is very likely in this process.
That is why; the analysts expect that there will be a surge in market volatility throughout the process. Losing steam after advancing for three consecutive days, the Dollar failed to hold above the 23.6% retracement level.
That currency is now back in a vulnerable bearish position versus major currencies. Meanwhile, investors are looking forward to the Eurozone, UK and US Purchasing Manager's Index (PMI) data to be released.
Gold is Traded in a Limited Range
The data became one of the main focuses of the market this week. Elsewhere, The precious metal looked consolidative in trading on Tuesday (22/November) yesterday.
Gold's safe haven assets are trading in a limited range due to the attitude of investors who are looking forward to the Fed's next hike rate hint in the FOMC minutes.
As a result, gold did not record much change at the close of trading yesterday. So far, traders have only gotten signals from the statements of some Fed officials.
San Francisco Fed Chair, Mary Daly, warned of the risk of overtightening. Meanwhile, the Cleveland Fed Chair, Loretta Mester, wants to see inflation rates fall sustainably.