As expected by the market, the U.S. Federal Reserve announced at its monetary policy meeting in early November that it would reduce its monthly asset purchases by US$15 billion; the purchases of Treasury bonds and mortgage-backed securities would be reduced by US$10 billion and US$5 billion, respectively. Powell still said that inflation is temporary and expected to fall in the second or third quarter of next year, and that he would keep patient on raise interest rates. 

However, the U.S. consumer price index in October rose further to 6.2% year-on-year, reflecting that the inflation situation is worrying. More voices in the Fed also begun to think that it is necessary to speed up the action to avoid policy lagging behind the situation. Hence, the U.S. dollar raise because of this. There once at high position 96.24 before writing. It is believed that the US dollar still has upside potential and is expected to challenge 97.50/98.00, mainly because the monetary policy has its advantages. But shortly, we may need to consolidate and pay attention to the support of 10MA 95.40, and maybe it’s good to absorb at a low position. 

Japan’s third-quarter GDP contracted 0.8% quarter-on-quarter, and the new Prime Minister Fumio Kishida announced a 56 trillion yen (490 billion U.S. dollars) fiscal stimulus plan, including the ruling party’s pledge during the general elections promise to distribute cash to families with teenagers under 18 and provide support to SMEs and support the cutting-edge semiconductor industry. Government spending may require new debt to finance, which will put further pressure on public debt. Central Bank Governor Haruhiko Kuroda said earlier that he did not believe that the current performance of the yen would be particularly unfavorable to the economy and reiterated that he would continue to loosen policies. The Japanese economy has once again fallen into a contraction zone, and its monetary policy has also run counter to that of other major economies. Unless the Bank of Japan intervenes, the yen is still easy to fall but difficult to rise. The initial support of the US dollar is near 113.20, and the resistance is at 115.00/50. If it breaks through, it will have an opportunity to test 118. 

The Bank of England unexpectedly did not raise interest rates in November, but the recent governor Bailey said that the inflation situation is disturbing, and the latest employment data has performed well. The tight construction may push up wages and further increase inflation. In addition, the UK’s October consumer price index rose sharply from 3.1% to 4.2% year-on-year. The data reflects that inflation continues. The Bank of England’s December interest rate hike may increase significantly, which may limit the decline in the pound. However, technical trends show that the pound exchange rate is still at the short-term downward trend may fluctuate between 1.33/1.36 in the short term.

Patrick Law General Manager of Hantec Group