November Currency Review

The US dollar index is poised for a second consecutive monthly gain. This upswing is fueled by a growing belief that the US economy is better equipped to weather higher interest rates than other economies.

Recent data underscores this optimism, with the US economy maintaining a steady growth rate of 2.1% in the second quarter. Additionally, initial jobless claims remained lower than expected at 204,000, signaling a strong labor market. The Federal Reserve’s decision to keep interest rates steady but hint at another hike before year-end, along with reduced rate cut expectations for the following year, has further solidified the view that more rate hikes are on the horizon.

In August 2023, core PCE prices in the US, excluding food and energy, showed a modest increase of 0.1% on a monthly basis, falling below market expectations of a 0.2% increase. The annual inflation rate eased as anticipated to 3.9%, marking the lowest rate since May 2021.

When factoring in food and energy costs, the PCE price index registered a 0.4% increase from the previous month and a 3.5% rise compared to the same period in 2022. These figures highlight the evolving inflationary landscape and its implications for the US economy.


The Euro has nearly matched the lows we haven’t witnessed since last December. It’s feeling the pressure from a stronger US dollar, driven by the Federal Reserve’s hawkish stance and the expectation that US interest rates will stay elevated for an extended duration. In addition, investors have been closely monitoring inflation trends within the Eurozone and their potential impact on monetary policy.

Data indicates that the inflation rate in the Euro Area decreased to 4.3% year-on-year in September 2023, reaching its lowest point since October 2021, below the market consensus of 4.5%. The slowdown in price increases was notable for services, non-energy industrial goods, and food, alcohol, and tobacco. However, energy costs experienced deeper deflation.

The core inflation rate, a crucial measure that excludes volatile food and energy prices, also cooled to 4.5% in September, marking its lowest point since August 2022. Among the Eurozone’s largest economies, Germany, France, and the Netherlands saw declines in their HICP rates, while Italy and Spain witnessed inflation rates accelerating. These developments underscore the complex inflation dynamics within the Eurozone.

The prevailing sentiment now suggests that the European Central Bank will unlikely pursue further interest rate hikes for the remainder of the year. However, interest rates are expected to remain elevated for an extended period.


In August 2023, Japan’s unemployment rate held steady at 2.7%, defying market expectations of a drop to 2.6%. This rate marked the highest level since March, with the number of unemployed individuals rising by 10,000 to reach 1.85 million. However, there was a positive note as employment increased by 50,000, reaching 67.50 million.

The labor force also expanded by 50,000, totaling 69.34 million, while the number of people detached from the labor force decreased by 90,000 to 40.85 million. Notably, the non-seasonally adjusted labor force participation rate increased to 63.1% in August compared to 62.9% in the same month the previous year. Additionally, the jobs-to-applications ratio remained at 1.29 in August, matching the figure from July and staying at its lowest point since July 2022.

Simultaneously, the Japanese yen experienced a decline, dropping below 149 per dollar to hit an eleven-month low. This downward spiral has raised concerns about potential government intervention. The yen’s depreciation this year has been attributed to the Bank of Japan’s (BOJ) commitment to maintaining ultra-easy monetary policies while other major central banks pursued aggressive tightening measures.

The BOJ’s decision to retain a dovish stance at its September meeting dashed hopes of signaling an end to its negative interest rates policy. Consequently, Japan’s finance ministry has issued warnings of possible currency intervention in response to the yen’s weakening.

Additionally, headline inflation in the country slowed to 3.2% in August, down from 3.3% in July, while core inflation remained above the BOJ’s 2% target for the 17th consecutive month. As a result, the yen is projected to lose approximately 2.6% in September and about 3.5% in the third quarter.


The New Zealand dollar approached $0.6002 on Friday, reaching its highest level in four weeks and marking its second consecutive session of strength. This boost in the currency’s value is driven by expectations that the Reserve Bank of New Zealand (RBNZ), in its upcoming monetary policy meeting, might maintain high interest rates.

This move comes as New Zealand grapples with an annual inflation rate of 6%, exceeding the central bank’s target range of 1%-3%. This inflationary pressure has persisted despite two years of aggressive rate hikes totaling 525 basis points, bringing interest rates to 5.5%.

Despite these challenges, the Kiwi dollar has been showing modest monthly gains, bolstered by improved sentiment among local businesses and households in anticipation of the October 14th election. Additionally, New Zealand’s economy was pleasantly surprised by exceeding expectations in the second quarter, breaking free from the weaknesses observed in the preceding two quarters.

However, for the quarter, the Kiwi dollar is expected to decline by over 2%, largely due to the strengthening US dollar and an ongoing property crisis in China, a key trading partner of New Zealand.


Gold prices held steady below $1,880 an ounce last Thursday, marking their lowest levels in over six months. This decline can be attributed to a strong US dollar and rising Treasury yields, driven by expectations of enduring high interest rates. The US dollar surged to ten-month highs against a basket of currencies, while the benchmark 10-year US yield reached levels not seen since 2007.

The Federal Reserve’s recent decision to keep interest rates unchanged and anticipation of fewer rate cuts in the coming year has contributed to this scenario. Minneapolis Fed President Neel Kashkari’s statement that there’s nearly a 50-50 chance of significantly higher interest rates to combat inflation has further influenced market sentiment.

On Friday, gold prices saw a slight uptick to $1,873 per ounce after the US PCE report hinted at a slowdown in inflationary pressures. Despite these positive signals, gold prices remained near their lowest levels since March 10th.


We witnessed a whirlwind of economic dynamics shaping the forex landscape in September. The US dollar has been on a steady rise, bolstered by growing confidence in the US economy’s resilience to higher interest rates. However, a close eye remains on inflation, with the core PCE price index posting a modest 0.1% increase in August, highlighting the evolving inflationary landscape.

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Monthly Currency Review November 2023

The US dollar declined this week following comments by Federal Reserve official Christopher Waller, suggesting that the central bank might not raise rates further and could consider cuts if inflation eases. The USD hit a three-and-a-half-month low against a basket of peers after Waller hinted at the possibility of lowering the Fed policy rate in the coming months.

Waller expressed confidence that the current interest rate setting would effectively reduce inflation to the Fed’s 2% target. However, another Fed governor, Michelle Bowman, indicated the likelihood of further rate hikes to bring inflation back to target.

Influenced by Waller’s comments, traders increased bets on a potential rate cut as early as March, with a 33% probability of a 25 basis-point cut, up from 21.5% on Monday, according to CME data. The majority anticipate at least a one-notch cut in May.

Meanwhile, a November survey revealed a rise in US consumer confidence, though households still anticipated a recession within the next year. The week’s focus includes the US October Personal Consumption Expenditures (PCE) report and eurozone consumer inflation figures for insights into inflation trends and monetary policy.


European shares experienced a second consecutive decline as comments from European Central Bank (ECB) officials diminished expectations of interest rate cuts in the coming year. Despite this, the benchmark remained on track for its strongest monthly performance since January, fueled by the anticipation that major central banks, including the ECB, might shift toward policy easing.

Bundesbank chief Joachim Nagel suggested that the ECB could raise interest rates again if the inflation outlook worsened, cautioning against hasty policy easing after record-setting rate hikes. ECB President Christine Lagarde emphasized the ongoing efforts to control price growth.

Central bank policymakers aimed to temper expectations of imminent rate cuts. Investors recalibrated expectations, with the probability of a 25 basis-point rate cut by the ECB in April decreasing from about 90% two weeks ago to 45%. While consumer sentiment in Germany improved slightly heading into December, it continued to remain low, suggesting a weak recovery in the largest economy in the Eurozone.

Traders will closely monitor upcoming economic data, including Eurozone inflation numbers and the US PCE index, for insights into the monetary policy trajectory.

Flash CPI data indicated a more significant-than-expected slowdown in inflation across the Euro Area, encompassing Germany, Italy, and Spain. Furthermore, the Eurozone’s core inflation rate dropped to 3.6%, the lowest since April 2022, falling below the projected 3.9%.

In contrast, members of the US Federal Reserve shifted away from their previous hawkish stance. Despite the recent depreciation, the euro recorded a monthly gain of over 3% in November, marking its most substantial monthly increase since November 2022.


Former top Japanese currency official Tatsuo Yamasaki anticipates that the yen will not significantly weaken against the dollar and could strengthen next year. Yamasaki, Japan’s former vice minister of finance for international affairs, suggests that the Bank of Japan might abandon its negative interest rate policy in April at the earliest, considering the results of annual labor talks and other indicators.

Last year’s yen weakness led to a spike in import prices and inflation, but this year, the impact has lessened, and the interest rate gap with the US has narrowed. Yamasaki notes decreased implied volatility, reducing the rationale for currency intervention, although he does not rule out the possibility.

Masato Kanda, Japan’s current top currency official, indicated being on “standby” during the yen weakening near 152, suggesting a willingness to intervene if necessary.


The New Zealand dollar rose by 1% against the US dollar to nearly 0.62 after the Reserve Bank of New Zealand (RBNZ) maintained its official cash rate at 5.5% and indicated the possibility of further rate increases to address inflation concerns.

Following the decision, the Kiwi dollar reached its highest level in almost four months. Despite a 2.5% decline in the currency this year, it’s on track for its third consecutive annual decrease.

The RBNZ emphasized the persistence of elevated inflation and asserted the need for a restrictive monetary policy to control it, stating that the official cash rate must remain high to subdue demand growth and bring inflation back within the 1 to 3 percent target range. This marks the fourth consecutive time the RBNZ has held interest rates steady at a 15-year high. In Q3, New Zealand’s consumer prices recorded a 5.6% year-over-year increase.


Since early October, the price of gold has increased by about 11%, primarily due to safe haven purchases made following the Israel and Hamas conflict. This upward movement was supported by a weakening US dollar and the Federal Reserve’s expectations of a more accommodative stance. Spot gold gained approximately 2.7% during the month, reaching a more than six-month high.

Despite challenges posed by a major resistance zone at $2,010/$2,015 throughout the year, the precious metal’s constructive bias strengthened. The bullish outlook was contingent on a clear and decisive move above this resistance zone, with the potential for further upward momentum towards $2,060 and $2,085, the May high. The dynamics of XAU/USD in November underscored the impact of US dollar fluctuations and Federal Reserve policies on gold prices.


The dollar index strengthened to 103.2 at the end of November, primarily driven by a weakening Euro due to inflation figures in the Euro Area falling below forecasts. Despite this late-month uptick, the dollar is set to conclude November with a significant 3% decline, marking its most substantial monthly loss in a year.

The currency remains close to its mid-August lows. The decline is attributed to growing market expectations that the Federal Reserve’s tightening campaign has concluded, and there are increasing bets that the central bank might initiate interest rate cuts in the coming year.

In the US, upcoming economic indicators include the highly anticipated US labor report, JOLTS job openings, ISM Services PMI, preliminary readings of Michigan consumer confidence, factory orders, and trade data. Attention will also be paid to foreign trade data releases from Germany, Australia, China, and France.

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