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Weekly Market Outlook For November 21st To November 27th

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Written by:
Myrsini Giannouli

21 November 2022
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Forex

Important calendar events

  • November 21, EUR: German PPI, German Buba Monthly Report
  • November 22, JPY: Annual BOJ Core CPI
  • November 22, EUR: Current Account, Consumer Confidence
  • November 22, USD: Richmond Manufacturing Index
  • November 23, EUR: French and German Flash Services PMI, French and German Flash Manufacturing PMI, Eurozone Flash Services PMI, Eurozone Flash Manufacturing PMI
  • November 23, GBP: Flash Services PMI, Flash Manufacturing PMI
  • November 23, USD: Flash Services PMI, Flash Manufacturing PMI, Core Durable Goods Orders, Durable Goods Orders, Unemployment Claims, New Home Sales, Revised UoM Consumer Sentiment, Revised UoM Inflation Expectations, FOMC Meeting Minutes
  • November 24, JPY: Flash Manufacturing PMI
  • November 24, EUR: German IFO Business Climate, Belgian NBB Business Climate, ECB Monetary Policy Meeting Accounts
  • November 24, GBP: CBI Industrial Order Expectations
  • November 25, JPY: Annual Tokyo Core CPI, Annual SPPI
  • November 25, EUR: Quarterly German Final GDP, German GfK Consumer Climate, German Import Prices, French Consumer Spending, French Preliminary CPI

USD

Market expectations of future rate hikes were considerably trimmed after the CPI inflation report and were further diminished after Tuesday’s PPI inflation print.

The dollar was mostly subdued last week, dipping mid-week and then rallying a little at the end of the week. The dollar index fell as low as 105.5 during the week, but recovered later on, ending the week near the 107 level. US Treasury yields started the week off strong, retreated mid-week, and rallied towards the end of the week. The US 10-year bond dropped from 3.9% to 3.7% during the week, before recovering and touching 3.8% on Friday. Diminishing Fed rate hike expectations are putting pressure on US bond yields and dollar price, which had been trading in the overbought territory over the past few months.

The US mid-term Congressional elections last week have put pressure on the dollar. Political instability over the past week has pushed the dollar down. As markets began to digest the outcome of the elections on Thursday though, the dollar started to recover. The results of the elections were close, with the votes being tallied for a week. Republicans eventually wrested control of the House from the Democrats, winning the elections with a narrow majority. The Democratic party has lost control of the Senate and will find it hard to push its economic and political agenda in the future. Earlier this week, former US President Donald Trump announced that he would run again for President in the 2024 US elections. 

US Monthly CPI in October rose by only 0.4% against predictions of 0.6%. Annual CPI printed at 7.7%, compared to 8.2% the previous month and the 7.9% expected. Slowing price pressures may induce the Fed to pivot towards a more dovish policy reducing the aggressiveness of future rate hikes. On Tuesday, PPI data confirmed that US inflation is cooling faster than expected, causing the dollar to plummet. Monthly PPI for October printed at 0.2%, against expectations of 0.4%. Monthly Core PPI, which excludes food and energy, was stagnant, versus a 0.3% rise predicted and a 0.2% rise in September. 

The US Federal Reserve voted to increase interest rates by 75 basis points at its latest monetary policy meeting. The Fed has so far increased interest rates by a total of 375 basis points this year, bringing its benchmark interest rate in a range of 3.75% to 4.0%. 

Market expectations of future rate hikes were considerably trimmed after the CPI inflation report and were further diminished after Tuesday’s PPI inflation print. Slowing price pressures may induce the Fed to pivot towards a more dovish policy reducing the aggressiveness of future rate hikes. Market odds are currently between a 50-bps and a 25-bps interest rate increase in December. Rate hikes are expected to taper off in 2023 as the central bank moves into a stable interest rate. 

The Philly Fed Manufacturing Index fell short of expectations on Thursday, printing at -19.4, against the -6.0 predicted. Negative values indicate worsening conditions in the manufacturing sector. Unemployment claims on the other hand were optimistic, dropping to 222K from 226K last week and against expectations of 228K.

US retail sales were up by 1.3% in October showed data released on Wednesday, compared to 1.0 predicted. Core retail sales, which exclude food and energy, grew by 1.3% in October, exceeding expectations of 0.5% growth and were higher still than September’s growth of 0.1%. Industrial production in October fell by 0.1% though, against expectations of 0.1% expansion.

The Empire State Manufacturing Index, which is a leading indicator of economic health, came out higher than expected on Tuesday. The indicator rose above zero, printing at 4.5, which signifies improving economic conditions. Last month’s print was at -9.1, while a negative result of -6.1 was expected. The optimistic economic data was not sufficient to support the dollar, however, which declined, on reduced rate hike expectations.

Fed rhetoric last week remained hawkish, although cautiously so. The consensus between FOMC members seems to be that although inflation is cooling, further tightening will be required to bring inflation down consistently to the central bank’s 2% target. Fed’s Susan Collins stated on Friday that, while a 75-bp hike is still on the table, a 50-bp move would be considered a large increase as well. 

Fed’s Bullard emphasized on Thursday that the Fed should err on the side of keeping rates higher for longer to avoid the mistakes of the 1970s. He also stated that, while October’s inflation data were encouraging, one month’s print is not definitive. FOMC member Loretta Mester stressed though, that rate hikes need a background of financial stability and that U.S. financial market weaknesses need to be addressed.

Fed's Barr stated on Tuesday that the U.S. is not in recession, hinting that the economy can withstand further tightening. FOMC member Harker commented on Tuesday’s PPI inflation reading, stressing that he does not like to base policy decisions on a couple of headline figures. He admitted, however, that the Fed may consider pausing rate hikes to avoid dramatic increases and then decreasing interest rates. Fed’s Bostic emphasized that persistent inflation needs to be targeted, even at the cost of a mild recession stemming from monetary policy tightening.

FOMC member Chris Waller stressed on Sunday that the US central bank still has a long way to go to bring inflation down to its 2% target. He added that interest rates are going to continue to increase and will remain high until US inflation has been brought under control. Fed’s Brainard on Monday also emphasized the need to tackle inflation but pointed to a slower pace of rate hikes down the road.

Several indicators of economic activity are scheduled to be released this week for the US and may cause high volatility in dollar prices. Flash Services and Manufacturing PMI data due on the 23rd are important indicators of economic health and may provide information on the economic outlook of the US. The minutes of the latest FOMC meeting are also scheduled to be released on the 23rd and may affect the dollar price. Fedspeak is also of primary importance this week, as traders will pay special attention to Fed members’ speeches in an attempt to gauge any changes in the central bank’s future policy direction.

TRADE USD PAIRS

EUR 

Final Eurozone headline inflation hit an all-time high of 10.6% in October, which was much higher than September’s print of 9.9%, mainly due to the high cost of energy.

The Euro traded sideways against the dollar last week. EUR/USD was testing the 1.036 level resistance throughout the week and closed near 1.032 on Friday. If the EUR/USD pair declines, it may find support at the parity level and further down near 0.973. If the currency pair goes up, it may encounter further resistance near 1.061.

On Thursday, the Final Eurozone headline inflation hit an all-time high of 10.6% in October. Surging inflation in the EU is mainly due to the high cost of energy. Even though Eurozone inflation reached record highs in October and was much higher than September’s print of 9.9%, it was slightly lower than the preliminary estimate of 10.7%. Lower than-expected inflation caused the Euro to retreat on Thursday, as it eases a little the pressure on the ECB to raise interest rates.

ECB President Christine Lagarde delivered a hawkish speech on Friday, following the release of the soaring inflation rates. Lagarde stressed the need to keep on fighting inflation within the eurozone using interest rate hikes, despite recessionary risks. ECB's Knot on Friday stated that he is more concerned with doing too little than with doing too much in the fight against inflation. Knot emphasized, however, that introducing a Quantitative Tightening program early, would reduce peak inflation, diminishing the need for aggressive rate hikes. In addition, ECB's Holzmann stressed on Tuesday that interest rates will be raised even further to combat high inflation rates.

The ECB published its Financial Stability Review on Wednesday, in which the European central bank warned of potential risks to financial stability in the euro area. The ECB report emphasized the dangers of high inflation to the stability of banks and governments in the EU and also highlighted the dangers of a poor EU economic outlook. 

Eurozone economic outlook is poor, showing signs that the EU is entering a recession, limiting the ECB’s ability to raise interest rates. Eurozone GDP grew by 0.2% in the third quarter of 2022 as expected. Economic expansion is slowing down, following a 0.7% GDP growth in the second quarter. Annual EU GDP growth was in line with expectations, printing at 2.1%. Analysts are predicting stagnation later this year and in the first quarter of 2023. 

Even though further ECB rate hikes seem certain, the magnitude of the hikes may decrease if the EU shows signs of entering a recession. Stagflation becomes a real headache for the ECB, which will be forced to battle inflation without the support of a robust economic background. In its latest monetary policy meeting, the ECB raised its interest rate by 75 basis points to 1.5%, the highest since 2009. Soaring EU inflation rates are forcing the central bank to hike rates aggressively to reduce price pressures. Market odds are currently in favor of a 50-bps rate hike at the ECB’s next monetary policy meeting. 

Several important economic indicators were released last week for the EU, causing volatility in Euro price. German ZEW Economic Sentiment improved unexpectedly in November, rising to -36.7 from -59.2 in October. Eurozone ZEW Economic Sentiment similarly improved, printing at -38.7 in November versus -59.7 in October. Monthly Industrial Production in the Eurozone exceeded expectations, providing support for the Euro. Industrial Production in September increased by 0.9% against expectations of a 0.1% increase, although it presented a decrease compared to August’s 2.0% growth. 

A missile landing in Poland earlier in the week threatened to bring the Russia-Ukraine war to a wider area triggering an emergency NATO meeting on Wednesday. NATO Secretary General Jens Stoltenberg stated after the conclusion of the meeting that the deadly missile likely came from Ukraine’s air defense system. NATO’s statement helped dissipate rumors that the errant missiles were an attack against Poland by Russia and geopolitical tensions eased.

This week, dollar action is expected to affect the Euro considerably. Important economic activity indicators are scheduled to be released this week for the Eurozone and are likely to cause volatility in the Euro price. Flash Services and Manufacturing PMI data due on the 23rd are important indicators of economic health and may provide information on the EU economic outlook. The Accounts of the latest ECB Monetary Policy Meeting on the 24th may also provide information on the ECB’s future policy direction.

EURUSD 1hr chart

TRADE EUR PAIRS

GBP 

UK Chancellor Jeremy Hunt announced that his priorities lie with stability, growth, and public services as the government plans to tackle the cost-of-living crisis and rebuild the economy.

The Sterling exhibited high volatility last week, especially after the announcement of the government’s fiscal statement on Thursday. GBP/USD dropped to 1.176 on Thursday, but pared its losses towards the end of the week, closing near 1.188 on Friday. If the GBP/USD rate goes up, it may encounter further resistance near 1.228, while support may be found near 1.133 and further down near 1.114. 

The dollar’s decline last week propped up competing currencies. The Sterling, however, is under pressure from increased risk aversion sentiment. The pound is also threatened by political uncertainty in the UK. Political instability has been playing a major part in the currency’s decline over the past few months, driving the pound to an all-time low. 

The much-anticipated fiscal plan of the new government was released on Thursday and brought volatility to the Sterling, even though the new financial statement contained few surprises. The fiscal statement was a complete reversal of the previous government’s controversial budget and aims to fill a 55-billion-pound hole in Britain's budget. Chancellor Jeremy Hunt will be cutting government spending in an attempt to restore public finances. Hunt also plans to freeze thresholds and allowances on income tax, national insurance, and pensions for a further two years.

The UK’s Chancellor announced that his priorities lie with stability, growth, and public services as the government plans to tackle the cost-of-living crisis and rebuild the economy. Hunt also stated that the government will not change the BoE remit, which may restore stability in the government’s relationship with the UK central bank.

UK inflation hit a 41-year high in October, data released on Wednesday showed. Annual CPI climbed to 11.1% in October, its highest value since 1981. October’s inflation exceeded September’s print of 10.1% and expectations of 10.7%. Inflation in the UK continues to rise, mainly due to the high cost of energy. Annual core CPI, which excludes food and energy, printed at 6.5%, exceeding expectations of 6.4%. Rising UK inflation is forcing the BOE to make some tough choices against a weak economic backdrop.

British Chancellor Jeremy Hunt released a statement on Wednesday after the UK inflation report, emphasizing the need to make difficult decisions to quell inflationary pressures and assist the BOE in their assignment. BoE Governor Andrew Bailey likely received Hunt’s comments as a criticism against the BOE for failing to bring inflation down. Bailey stated later on Wednesday that he is concerned about probable government action in financial regulation in the future and emphasized that he is opposed to the finance ministry having the authority to review regulatory judgments.

Upbeat UK Retail Sales data on Friday, propped up the Sterling. Retail sales volumes rose in October by 0.6% month-on-month, following a 1.5% drop in September, beating expectations of a 0.5% increase. Employment indicators released on Tuesday for the UK were mostly optimistic, boosting the Sterling. Claimant Count Change, which is the number of people claiming unemployment, dropped to 3.3K in October from 3.9K in September, against expectations of a rise to 17.3K. Average Earnings grew by 6.0% in September versus the 5.9% expected, indicating that employers are paying more for labor, although unemployment climbed to 3.6% in September compared to 3.5% in August. 

The British economy is still struggling and policymakers will have to assess how much tightening it can withstand to bring inflation down. UK monthly GDP for September dropped by 0.6%, against expectations of a more modest, 0.4% drop, indicating that the country is already in the grip of recession. Quarterly preliminary GDP for the third quarter of 2022 also came out negative, printing at -0.2%, compared to a 0.2% growth in the second quarter. The BOE predicts that the recession could last for almost two years, with expansion not expected again till mid-2024.

At the latest monetary policy meeting, BOE members voted to increase interest rates by 75 bps. Currently, the BOE’s interest rate is at 3.0% and the difference with the Fed’s rate of 4.0% is putting pressure on the Sterling. The BOE will also be introducing another round of gilt sales this month, as they shrink their balance sheets.

This week, markets will be digesting the government’s new fiscal plan. Several economic activities and health indicators are also scheduled to be released this week for the UK and may cause volatility in the Sterling price in the wake of last week’s budget announcement. Flash Services and Manufacturing PMI data due on the 23rd are important indicators of economic health and may provide information on the economic outlook of the UK. CBI Industrial Order Expectations on the 24th may also affect Sterling.

GBPUSD 1hr chart

TRADE GBP PAIRS

JPY

Annual Preliminary GDP data showed that Japan’s economy contracted in the third quarter of 2022, raising recession concerns for the world’s third-biggest economy.

The Yen traded sideways against the dollar last week, with the USD/JPY testing the 139.4 level support, before closing near 140.3 on Friday. If the USD/JPY pair declines, it may continue testing the support at 139.4, while further support may be found at 130.4. If the pair climbs, it may find resistance at 146.9 and further up at 151.9.

Lower than-expected US inflation print brought the dollar last week, benefitting competing currencies. Cooling price pressures in the US may lead the Fed to adopt a more dovish stance, reducing the aggressiveness of future rate hikes. 

Annual National Core CPI data released on Friday showed that inflation in Japan continues to rise. Japan’s CPI rose by 3.6% year-on-year in October, beating expectations of a 3.5% rise. October’s data are much higher than September’s 3.0% print, indicating that price pressures continue to rise in Japan. Hotter than expected inflation is mainly due to the high cost of imported energy.

Economic activity indicators released last week for Japan were more pessimistic than expected, putting pressure on the Yen. Trade balance data on Thursday came at -2.30T for October. A negative print shows that the value of goods imported was higher than that of exports in Japan. The trade balance in October showed a deficit of 2.30T, compared to the 1.93T predicted, with the balance in favor of imported goods increasing from September’s print of -2.04T. 

Core Machinery Orders for September on Wednesday were down by 4.6%, against expectations of a 0.6% increase. Tertiary Industry Activity for September declined by 0.4%, versus an expansion of 0.6% projected and a rise of 0.7% in August. The Japanese economy remains sluggish, putting pressure on the currency.

GDP data for Japan on Tuesday were disappointing, showing that Japan’s economy shrank in the third quarter of 2022. Preliminary GDP for Q3 of 2022 shrank by 0.3%, against expectations of growth of 0.3% and a 0.9% growth in the previous quarter. The annual Preliminary GDP Price Index printed at -0.5%, indicating that the Japanese economy is contracting, mainly due to the high costs of imported energy. Japan’s economic outlook is poor, raising recession concerns for the world’s third-biggest economy.

In its latest policy meeting, the BOJ left its monetary policy unchanged, as expected. The BOJ maintained its ultra-easy monetary policy keeping its main refinancing rate at -0.10%. Japan continues to pour money into the economy, while other countries are adopting a tighter fiscal policy. The difference in interest rates with other major Central Banks, especially with the Fed, puts the Yen at a disadvantage, driving its price down. 

Japanese authorities recently staged interventions to support the Yen, as evidenced by the currency’s sudden surges after the USD/JPY moved above the psychological level of 150. The Japanese government cannot support the Yen indefinitely, however, as continuous interventions would not be sustainable. 

The USD/JPY rate is expected to hinge largely on the dollar’s movement this week, in the wake of last week’s US inflation report. Political developments in the US are also likely to affect the dollar, as markets digest the outcome of the US mid-term elections. 

This week several important economic activity indicators are scheduled to be released for Japan and may affect the Yen. Annual BOJ Core CPI on the 21st and Annual Tokyo Core CPI on the 25th, may provide additional information on Japan’s inflationary outlook, following last week’s high inflation print. Flash Services and Manufacturing PMI data due on the 24th are important indicators of economic health and may provide information on the economic outlook of Japan.

USDJPY 1hr chart

TRADE JPY PAIRS

Gold 

The US dollar and yields are showing signs of recovering, raising speculation that gold prices might have capped.

Gold prices were volatile last week, starting the week off strong but retreating later on. Gold price touched $1,785 per ounce but edged lower towards the end of the week, dropping to $1,750 per ounce on Friday. If gold prices decline, support may be found near $1,666 per ounce and further down at $1,616 per ounce. Resistance may be found at $1,785 per ounce and higher up at around $1,802 per ounce.

The collapse of the US dollar and yields boosted gold prices in the past couple of weeks. Diminishing Fed rate hike expectations have put pressure on US bond yields and dollar prices, bolstering gold prices. The dollar, however, is showing signs of recovering, raising speculation that gold prices might have capped.

The dollar was mostly subdued last week, dipping mid-week and then rallying a little at the end of the week. The dollar index fell as low as 105.5 during the week, but recovered later on, ending the week near the 107 level. US Treasury yields started the week off strong, retreated mid-week, and rallied towards the end of the week. The US 10-year bond dropped from 3.9% to 3.7% during the week, before recovering and touching 3.8% on Friday. 

The US mid-term Congressional elections have put pressure on the dollar. As markets began to digest the outcome of the elections though, the dollar started to recover. The results of the elections were close, with the votes being tallied for a week. Republicans eventually wrested control of the House from the Democrats, winning the elections with a narrow majority. The Democratic party has lost control of the Senate and will find it hard to push its economic and political agenda in the future. Earlier this week, former US President Donald Trump announced that he would run again for President in the 2024 US elections. 

US Annual CPI printed at 7.7% in October, compared to 8.2% in September and the 7.9% expected. Slowing price pressures may induce the Fed to pivot towards a more dovish policy reducing the aggressiveness of future rate hikes. On Tuesday, PPI data confirmed that US inflation is cooling faster than expected, causing the dollar to plummet and providing support for gold prices. Monthly PPI for October printed at 0.2%, against expectations of 0.4%. Monthly Core PPI, which excludes food and energy, was stagnant, versus a 0.3% rise predicted and a 0.2% rise in September. 

Gold prices are under pressure by the shift of most major Central Banks towards a tighter monetary policy to combat rising inflation rates. Assets yielding interest become a more appealing investment compared to gold as interest rates rise. The US Federal Reserve voted to increase interest rates by 75 basis points at its latest monetary policy meeting. 

Market expectations of future rate hikes were considerably trimmed after last week’s inflation report and were further diminished after Tuesday’s inflation print. Market odds are currently between a 50-bps and a 25-bps interest rate increase in December. Rate hikes are expected to taper off in 2023 as the central bank moves into a stable interest rate. 

Fed rhetoric is especially important this week as it may provide hints on the US central bank’s direction after recent soft inflation data. Fed rhetoric remained hawkish last week, although cautiously so. The consensus between FOMC members seems to be that although inflation is cooling, further tightening will be required to bring inflation down consistently to the central bank’s 2% target.

XAUUSD 1hr chart

TRADE GOLD

Oil 

The International Energy Agency trimmed its forecast for global oil consumption next year due to global recession concerns, China’s weakening economy, and Europe’s energy crisis.

Oil prices plummeted last week, with WTI price retreating from above the $89.0 per barrel level at the start of the week, to below $79.0 per barrel on Friday. If the WTI price declines, it may encounter further support near $76.5 per barrel, while resistance can be found at $90.3 per barrel and further up at $93.4 per barrel. 

The International Energy Agency trimmed its forecast for global oil consumption next year. According to the IEA, several factors contribute to a reduced oil demand outlook, including global recession concerns, China’s Covid restrictions and weakening economy, and Europe’s energy crisis.

Surging Covid cases in China are pushing oil prices down. The country continues to grapple with rising Covid cases, with heavy restrictions impacting economic output. Beijing and other major Chinese cities reported record coronavirus cases this week, dashing expectations of ending lockdowns. Health authorities in China seem committed to keeping strict lockdowns and quarantines in place for the time being. The uncertainty over oil demand in China has influenced oil prices considerably as China is the world’s largest energy importer and zero-Covid restrictions severely limit oil demand. 

Last week, a missile landing in Poland threatened to bring the Russia-Ukraine war to a wider area, triggering an emergency NATO meeting on Wednesday. NATO Secretary General Jens Stoltenberg stated after the conclusion of the meeting that the deadly missile likely came from Ukraine’s air defense system. NATO’s statement helped dissipate rumors that the errant missiles were an attack against Poland by Russia. Geopolitical tensions eased towards the end of the week, putting pressure on oil prices.

In addition, oil flows on the Druzhba pipeline from Russia to Hungary were resumed on Wednesday after being temporarily suspended, as they had sustained damage in Moscow’s latest assault on Ukraine.

Concerns of political uncertainty in the US have caused market turmoil, putting pressure on oil prices. Concerns that political instability may tip the country into recession, reducing oil demand, have sent oil prices plummeting. The results of the elections were close, with the votes being tallied for a week. Republicans eventually wrested control of the House from the Democrats, winning the elections with a narrow majority. 

Oil prices gain support from the dollar’s recent weakness, as US PPI inflation data came out softer than expected on Tuesday. Cooling US inflation has reduced Fed rate hike odds, diminishing global recession concerns. October’s US inflation print came below expectations, bringing the dollar down. Market expectations of future rate hikes were considerably trimmed after the CPI inflation report the week before and were further diminished after Tuesday’s PPI inflation print. Aggressive rate hikes stifle economic activity, undercutting oil demand and putting pressure on oil prices. 

WTI 1hr chart

TRADE WTI

Bitcoin and major Cryptocurrencies 

Crypto markets were mostly stable last week, as risk sentiment was renewed and the previous week’s cryptocurrency sell-off was likely halted. 

Bitcoin price was steady last week, fluctuating around the $16,500 level. If BTC declines, support can be found at $15,000, while resistance may be encountered at $18,150 and higher up at the psychological level of $20,000. 

Ethereum price was mostly stable last week but retreated over the weekend below the support at $1,190. If Ethereum's price declines, it may encounter support further down at the psychological level of $1,000, while if it increases, resistance may be encountered near the psychological level of $1,500 and further up at $1,660.

Crypto markets were mostly stable last week, as the previous week’s sell-off was likely halted. Increased political stability in the US and easing geopolitical tensions restored risk sentiment. Though many cryptocurrency-related institutions are still at risk from the fallout, such as Crypto Bank Silvergate, which has seen its stock price plummeting this month.

Souring risk sentiment has hit crypto markets hard after the collapse of FTX. The FTX token faced liquidity issues, triggering a generalized crypto market sell-off. FTX CEO Sam Bankman-Fried has resigned and the company declared bankruptcy. These developments have undermined confidence in the crypto industry, giving rise to concerns of a cascading crypto crisis.

A missile landing in Poland on Tuesday threatened to bring the Russia-Ukraine war to a wider area triggering an emergency NATO meeting on Wednesday. NATO Secretary General Jens Stoltenberg stated after the conclusion of the meeting that the deadly missile likely came from Ukraine’s air defense system. NATO’s statement helped dissipate rumors that the errant missiles were an attack against Poland by Russia. Geopolitical tensions towards the end of the week, providing support for cryptocurrencies.

Uncertainty over the US mid-term elections and renewed lockdowns in China have added further pressure on crypto markets. The results of the elections were close, with the votes being tallied for a week. Republicans eventually wrested control of the House from the Democrats, winning the elections with a narrow majority and bringing a measure of political stability to markets. 

Risk sentiment was somewhat boosted by cooling US inflation earlier in the week. The softer US PPI inflation print for October on Tuesday, combined with last week’s CPI report, showed that US inflation is cooling at a faster rate than expected. Reduced inflation is diminishing recession concerns, propping up risk assets.

Market expectations of future rate hikes were considerably trimmed after last week’s US inflation report and were further diminished after Tuesday’s inflation print. Reduced rate hike expectations diminish global recession concerns, boosting risk sentiment. Market odds are currently between a 50-bps and a 25-bps interest rate increase in December. Rate hikes are expected to taper off in 2023 as the central bank moves into a stable interest rate.

BTC/USD 1h Chart

BTCUSD 1hr chart

 

ETH/USD 1h Chart

ETHUSD 1hr chart

The content provided in this material and/or any other material that this content is referred to, whether it comes from a third party or not, is for information purposes only and shall not be considered as a recommendation and/or investment advice and/or investment research and/or suggestions for performing any actions with financial products or instruments, or to participate in any particular trading strategy and cannot guarantee any profits. Past performance does not constitute a reliable indicator of future results. TopFX does not represent that the material provided here is accurate, current, or complete and therefore shouldn't be relied upon as such. This material does not take into account the reader's financial situation or investment objectives. We advise any readers of this content to seek their own advice. Without the approval of TopFX, no reproduction or redistribution of the information provided herein is permitted.

Written by:
Myrsini Giannouli

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