Optimism about peak rates and depleting recession fears has led investors to seek riskier bets in AI and emerging markets Monday, with Nasdaq hitting fresh highs for the year on the back of a weakening dollar. The 10-year fell to 4.393% following a relatively solid 20-year bond auction.
Chart: Nasdaq
A New York Fed survey showed that the appetite for new credit in the US has taken a dip, suggesting a shift in consumer behaviour and market dynamics. However, the AI craze seems to be back on for now, with Microsoft and Nvidia hitting record highs. The US dollar continued to stumble lower on Monday on higher Treasury bonds, with the spotlight turning towards the Fed’s minutes later today. 103 is the next round support for the DXY and a new low for the year, with resistance at 103.80.
BOE Governor Andrew Bailey warned of potential hikes from food and energy costs due to inflation risks, dismissing recent optimism about rate cuts. He emphasised the need for a restrictive policy while cautioning against premature cuts amid high service inflation and wage growth. The GBP/USD may be influenced by these warnings, reflecting concerns about inflation and economic challenges in the UK. The Pound spiked to a September high at 1.2520, leaving behind support at 1.2466 and exposing 1.2622 next up.
ECB’s Francois Villeroy has made it clear that there won’t be any rate hikes in the near future in Europe, barring unforeseen circumstances. Meanwhile, Germany was grappling with internal debates over suspending its “debt brake” rule, stirring up discussions on fiscal responsibility and economic stability. The European currency rose for the second consecutive day, and the focus now turns to 1.10 after a while unless bulls lose 1.09.
The oil market has continued to show resilience despite global economic slowdowns, with rumours of an OPEC+ cut leading another green session in the lead-up to the next OPEC+ meeting on November 26. Goldman Sachs revealed on Monday that deeper cuts wouldn’t be a surprise, with WTI nearing the $80 barrier again. On the downside, $75.70 seems to be a short-term support likely to offer at least an initial rejection.
The RBA was concerned that monetary tightening delays could complicate the path to target inflation but emphasised that future hikes will depend on upcoming inflation and employment data. The bank also said that there could be surprises that may warrant action. While some economists expect the end of hikes, others see one more in the books, with the Aussie up some 0.65% Monday to 0.6557. Next resistance can be seen at 0.66, whereas support waits by 0.6522.