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Dollar on track for fourth straight weekly gain as euro flags

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Euro's pain makes for dollar's weekly gain
© Reuters. FILE PHOTO: George Washington is seen with printed medical masks on the one Dollar near Euro banknotes in this illustration taken, March 31, 2020. REUTERS/Dado Ruvic/Illustration

By Tom Westbrook

SYDNEY (Reuters) – The dollar was set to post a second week of chunky gains against the euro on Friday as traders wager on interest rates rising faster and further on the North Atlantic’s western shore, while sterling and the also firmed with rate hike bets.

The euro has been the week’s big mover, and although it has recovered to $1.1356 after slumping to $1.1263, it remains vulnerable as fundamentals and positioning swing to favour the dollar.

The single currency has lost 0.7% this week, helping the rise 0.5% and touch a 16-month high. It last sat just shy of that at 95.629.

“Previous post-GFC occasions when the euro traded below $1.10 were accompanied by a big euro short position,” said Societe Generale (OTC:) strategist Kit Juckes.

“If the question is ‘will the market now get very short euros’ then I think the answer is that it will unless data improve dramatically.”

This week, U.S. retail sales beat expectations on the heels of last week’s inflation surprise. In Europe, meanwhile, COVID-19 is surging, car sales slipped for a fourth consecutive month and central bankers are vowing to hold rates low.

Friday moves were slight and the focus will be on central bank speakers, with European Central Bank President Christine Lagarde at 0830 GMT, Bank of England economist Huw Pill at 1200 GMT and Federal Reserve officials Christopher Waller and Richard Clarida at 1545 GMT and 1715 GMT the highlights.

Another factor keeping moves small is the expectation U.S. President Joe Biden will announce his nominee to lead the Fed before Thanksgiving on Nov. 25, with frontrunners incumbent Jerome Powell and Governor Lael Brainard.

“If Powell is nominated, the market will buy dollar/yen,” said Donnelly, trader and President at analytics firm Spectra Markets, since he is thought to take a slightly more hawkish approach to rate settings in the face of inflation.

“Euro/dollar shorts are big enough now that a Brainard win will hurt,” Donnelly said. “I would think you could see 100 pip euro/dollar rally on Brainard over one or two days.”

LIRA, BITCOIN BATTERED

In emerging markets, crisis in Turkey has driven the lira to a record low, while bitcoin is below $60,000 and eyeing its worst week in six months with cryptocurrency sentiment fragile.

Among other majors on Friday the yen was headed for a weekly loss of about 0.4%, though at 114.33 per dollar it has also recovered since touching an almost five-year low of 114.97 a few days ago.

The heavily-shorted and commodity-sensitive Australian dollar looks set for a third consecutive weekly loss and has been under pressure from a fall in oil prices over recent days. It was last steady at $0.7278. [AUD/]

Sterling has been the stellar performer besides the dollar among G10 currencies and has gained about 0.5% to $1.3487 as a surge in inflation to a 10-year high has firmed bets on the Bank of England hiking rates in a month.

The kiwi also leapt 0.7% on Thursday and is steady for the week as traders start to wager on the RBNZ turning extra hawkish and lifting rates by 50 basis points (bps) next week.

Swaps markets have priced a roughly 40% chance of a 50 bps hike.

“Rates markets remain skittish and the data pushed the bellwether two-year swap to a new high for the year, and that in turn, put the bid in behind the kiwi,” said analysts at ANZ Bank.

“With 36 bps (of hikes) priced in for next week and 198 bps priced in over the next eight meetings, local markets could be setting themselves up for some real disappointment if we ‘only’ get a 25 bps hike, as we expect.”

was headed for its worst week since May, dropping 13%. It was last near a three-week low at $57,033.

Economy

South Korean exports dropped 14% in November, the highest in 2.5 years

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exports South Korea

South Korea’s exports fell 14 percent year-on-year to $51.91 billion in November, preliminary data from the Ministry of Commerce, Industry and Energy showed. The November drop was the biggest in 2.5 years since May 2020 and was caused both by the deteriorating global economy, which even a Google price chart showed, and a truckers’ strike in the country.

South Korea exports 2022 – reasons for the drop

Exports fell for the second month in a row. Analysts on average expected an 11% decline, according to Trading Economics. Respondents to MarketWatch predicted a 10.5% decline.

Shipments of semiconductor products overseas, the country’s top export item, fell 29.8%; petrochemicals fell 26.5% and steel exports fell 10.6%. Meanwhile, exports of automobiles jumped 31% and petroleum products 26%.

Exports to China, South Korea’s largest trading partner, fell by 25.5%, and to Asian countries – by 13.9%. Below, supplies to the USA grew by 8% and to the European Union – by 0.1%.

In January-November exports rose by 7.8% on the same period last year and reached a record $629.1 billion.

South Korean imports rose 2.7% to $59.2 billion in November, marking the 23rd consecutive month of gains, but the current rate of growth is the lowest since November 2020. Experts had predicted an increase of only 0.2%.

South Korea’s trade deficit last month was $7.01 billion, compared with a surplus of $2,973 billion a year earlier.

The negative balance was recorded for the eighth month in a row. As a result, by the end of 2022, the country may record a foreign trade deficit for the first time since the financial crisis in 2008.

Earlier we reported that the UN estimates the cost of humanitarian aid in 2023 at a record $51 billion.

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The UN estimates humanitarian aid costs in 2023 at a record $51 billion because of an impending humanitarian crisis

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a humanitarian crisis

Joint humanitarian operations will require a record $51.5 billion in 2023 to address urgent problems.

The UN Office for the OCHA estimates that 339 million people will need urgent aid in 2023. At the same time, OCHA called on donor countries to provide funds for assistance in 2023 to the 230 million people most in need, living in 68 countries.

Griffiths explained that aid is needed not only for people experiencing conflicts and disease outbreaks. but also for those suffering the effects of climate change, such as people in peninsular Somalia facing drought and those in Pakistan experiencing severe flooding. For the first time, the growing humanitarian crisis has brought the number of displaced people worldwide to the 100 million mark. Also worsening an already bad situation is the worldwide coronavirus pandemic, which affects the poor. Note that the general economic crisis has begun to negatively affect even the Netflix price chart.

Earlier we reported that house prices in the UK fell by 1.4% in November.

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Economy

Average house prices in the UK fell 1.4% in November

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average house prices in the uk

Average house prices in the UK fell 1.4% in the previous month in November to 263,788 thousand pounds (about $319,000), according to the British mortgage company Nationwide Building Society.

The decline was recorded at the end of the second consecutive month and was the most significant in almost 2.5 years – since June 2020. Analysts on average had forecast a decline of only 0.3%, according to Trading Economics.

Are house prices in the UK going to fall even more?

Residential real estate prices in November compared to the same month last year increased by 4.4%. At the same time, experts expected a larger increase of 5.8%. The growth rate slowed down significantly compared with 7.2% in October. Because of the difficult economic situation, British investors are investing in other instruments. The Microsoft price chart, for example, is showing potential for growth, so many are interested in the U.S. stock market. 

“The market looks set to remain under pressure in the coming quarters. Inflation will remain high for some time, and interest rates are likely to continue to rise,” believes Nationwide Senior Economist Robert Gardner. – The outlook is unclear, and much will depend on how the overall economy behaves, but a relatively soft landing is still possible.”

Earlier we reported that Sanctions Circumvention was included in the EU’s list of criminal offenses.

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