Forex Today: Dollar surges alongside fears of an economic downturn

What you need to take care of on Tuesday, November 22:

The American Dollar edged higher on Monday, helped by a negative shift in the market’s sentiment. Risk aversion dominated financial markets after China’s National Health Commission reported two deaths of Covid-19 patients in Beijing, while the country reported over 26,000 new contagions on Sunday. Stay-at-home orders were issued in different regions, spurring concerns about a potential global economic setback amid the country’s strict covid policy.

The EUR/USD pair trades not far above a daily low of 1.0222, while GBP/USD barely holds above the 1.1800 figure. Germany published the October Producer Price Index (PPI), which unexpectedly contracted by 4.2% MoM. The annual figure was up by 34.5%, well below the previous 45.8%. It is the first sign of easing inflation in the EU.

European Central Bank (ECB) Executive Board member Philp Lane was on the wires and said that any recession in the Union would be mild and short-lived. He also noted that the ECB would hike rates again in December, progressing towards the levels needed. Government Council member Robert Holzmann said if the current situation persists, they will go for a 75 bps hike in December. Finally, ECB policymaker Mario Centeno noted that many conditions exist for rate increases to be less than 75 basis points in December.

Commodity-linked currencies ended the day with losses against the greenback. The AUD/USD pair trades around 0.6600, while USD/CADstands at 1.3440, down from an intraday high of 1.3416.

The Japanese yen was among the weakest US Dollar rivals, ending the day at around 142.05. In the meantime, the USD/CHF pair recovered to the 0.9590 price zone.

Gold fell for a fourth consecutive day, settling at around $1,738 a troy ounce. Crude oil prices, on the other hand, plunged ahead of the US opening amid market talks suggesting some OPEC members were considering a production increase of up to 500,00 barrels per day. The news was later denied by the Saudi Energy Minister, who said the current OPEC+ deal would continue until the end of 2023. Crude oi prices trimmed early losses and finished the day pretty much unchanged, with WTI now trading at $80 a barrel.

The week will be mostly light regarding macroeconomic releases, focusing on the FOMC Meeting Minutes to be out on Wednesday.