DXY depreciated a third session by 0.2% to 105.86 on Thanksgiving Day. Fed Chair Jerome Powell needs to sound hawkish when he discusses the economy and the labor market on 30 November. Although the market expects the Fed to deliver a smaller 50 bps hike in December, the US Treasury 10Y yield fell to 3.69%, below the 3.75-4% Fed Funds Rate. Although CPI inflation fell to 7.7% YoY in October from 8.2% in September, Powell will caution against declaring victory too soon. At the last FOMC meeting, Powell said rates would peak at a higher level than expected and that the Fed has yet to start an internal debate on where and when this will happen. Hence, watch out for some short covering in the DXY into Powell’s speech, with markets looking to resume USD sales on a slower PCE inflation on 1 December and another fall in nonfarm payrolls on 2 December. 
EUR appreciated 0.1% to 1.0410, its highest close since 4 July. European Central Bank Executive Board Member Isabel Schnabel wants to keep raising rates by 75 bps. Schnabel echoed Bundesbank President Joachim Nagel’s call for another “robust” hike at the meeting on 15 December. Nagel also wants the ECB to start quantitative tightening in early 2023. ECB President Christine Lagarde said the governing council would establish the “key principles” of unwinding the Asset Purchase Programme (APP) next month. Next week, Lagarde will give an introductory statement at a hearing before the Committee on Economic and Monetary Affairs of the European Parliament on Monday and participate in a panel discussion on growth and inflation on Friday. However, Powell’s speech on Wednesday is still considered more important. Unless EUR surpasses the 1.0479 high on 15 November, it could first correct inside its 1.0270-1.0440 range.
Quote of the day
“Know your enemy and know yourself and you can fight a hundred battles without disaster.”
Sun Tzu
25 November in history
Typhoon Nina in the Philippines (1987), Baku earthquake in Azerbaijian (2000), Cyclone Nisha in Sri Lanka (2008), Jeddah floods in Saudi Arabia (2009).
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