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U.S. Dollar Remains Pressured by Concerns Over Future Rate Hikes

By:
James Hyerczyk

Trading remains light in the U.S. markets early Friday with many major players deciding to extend their Thanksgiving holiday. It’s also a light report day

US Dollar

Trading remains light in the U.S. markets early Friday with many major players deciding to extend their Thanksgiving holiday. It’s also a light report day with only two scheduled at 1445 GMT.

U.S. Flash Manufacturing PMI is expected to come in at 55.1, up slightly from the previous 54.6. Flash Services PMI is forecast at 55.5 versus the previous 55.3.

Forex

The U.S. Dollar is trading lower versus a basket of currencies. Some of the weakness is an extension of the selling in response to the dovish Fed minutes released late Wednesday. The minutes indicated FOMC members were concerned about weak inflation which may lead to a reduction in the number of interest rate hikes in 2018.

The Euro was also up for a third consecutive day early Thursday before prices retreated. Traders continued to push the single-currency higher after taking out key resistance levels. The catalyst behind the move was a series of European business surveys which pointed to a strengthening growth outlook for the region.

The minutes of the European Central Bank for its October meeting didn’t reveal anything new, with policymakers broadly agreeing last month on extending its asset purchase program.

U.S. Treasury Markets

An overnight rally in June futures contracts meant that traders were pricing in a U.S. Fed funds target rate of 1.58 percent by then, implying only 2 more rate hikes, below market consensus. Recently, investors had been pricing in at least 3 more rate hikes in 2018.

Global Equity Markets

Asian equity markets were trading mixed on Friday, following a quiet overnight trading session with U.S. markets closed for the Thanksgiving holiday. Chinese stocks were hit hard in the previous session which is likely to lead to a more than 1 percent loss this week.

In Europe, volume is expected to remain thin on Friday. On Thursday, European equities finished on a relatively flat note.

Gold

Gold prices are inching lower early Friday with investors taking profits after posting a gain of nearly 1 percent on Wednesday on weaker U.S. economic data and concerns among some Federal Open Market Committee members over persistent lower inflation.

Crude Oil

Crude oil prices remain firm after hitting a two-year high on Friday. The rally is being fueled by the shutdown of a major crude pipeline from Canada to the United States. Trading activity is expected to be very low on Friday due to the U.S. Thanksgiving holiday.

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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