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The dollar continued to strengthen against most other major currencies, but by Tuesday morning the advance had to stop for the time being. The EUR/USD pair traded by Tuesday morning almost unchanged, while emerging market currencies like the Turkish lira (TRY), Russian rouble (RUB) and Mexican peso (MXN) rebounded from the recent lows.
Major stock market indices stabilized by Tuesday morning, but were still overall trading lower compared to the market close on Friday, while the US Tech 100 index fell again below the 13,000-mark. Volatility as indicated by the VIX Volatility Index noticeably increased on Monday from the recent low at the end of the week, when stock market valuations hit a new record.
Crypto markets strongly rebounded after the carnage over the weekend and on Monday, with the Bitcoin again trading above $36k at times, while Ethereum surged above the $1,100 mark after trading at times not at much more than $900.
Again, relatively few major fundamental data releases are scheduled for Tuesday. Multiple members of the FOMC are expected to hold speeches that day and the JOLTs job openings report for November can be expected.
The EUR/USD pair traded on Monday lower for the third consecutive trading day in a row, falling to the lowest level in 2021 to date at around 1.213. The exchange rate managed to climb back up later and stabilized further around the 1.216 mark at the time of the start of the European trading session on Tuesday.
It should be noted that it was not only the strength of the dollar which contributed to the fall in exchange rates over the past days, but also the relative weakness of the common European currency. The EUR/GBP and EUR/JPY pairs just to name some examples traded clearly in the red again after already moving in that direction at the end of the previous week.
On Tuesday retail sales data from Italy and the NFIB Small Business Optimism Index from the US can be expected.
Gold prices ended the trading day on Monday almost unchanged after experiencing again sizable intraday volatility with the price of a troy ounce of the precious metal dropping as low as $1,817 in the spot markets, which is the lowest price in more than a month. However, later by Tuesday morning precious metals rebounded with gold, platinum and silver trading higher.
Gold might have been affected by the market fundamentals, namely the strengthening dollar and at the same time rapidly rising rates on US Treasury notes. Both factors are in theory at least factors that can contribute to a lower price of gold.
After a disappointing start into the new week, oil prices quickly rebounded with a barrel of WTI crude oil traded by Tuesday morning at times above $52.7, which is yet another new record since February 2020.
While oil markets might still feel the support from the Saudi pledge to unilaterally cut production levels, on the other hand the still wide-spread COVID lockdowns, with China now also adding for the first time in month measures to contain local outbreaks are of concern to a recovery in terms of demand. Still, the cold spell across the Norther hemisphere might help support the price levels in the near future.
On Tuesday the American Petroleum Institute (API) is publishing its weekly statistical bulletin, which will include among other data the weekly change in crude oil stockpiles. Then on Wednesday the Energy Information Administration (EIA) is following up with its own statistics which also include weekly inventory statistics on crude oil, gasoline and distillates.
Major stock market indices traded with a noticeable downside on Monday, clearly down from the all-time high attained last week. One of the factors affecting the previously positive sentiment in the market could be the relatively fast rise of yields on Treasury notes, which can also serve as benchmark for lending to corporations. The concern is that rising yields will affect earnings as especially in recent years with easy access to cheap money, companies made record levels of stock-buy backs financed by debt issuance.
While stocks of the electric car maker Tesla (-8.00%) finally faced some resistance on their way to yet another all-time high, the company’s Chinese competitor Nio (+6.47%) traded at a new all-time high. Nio released its first sedan model and claimed even that its self-driving technology was superior to that of competitors like Tesla.
This week still relatively few quarterly results can be expected ahead of the earnings season which will start next week. As often the case, Wall Street banks including the likes of JPMorgan Chase, Citigroup and Wills Fargo will kick off the reporting season on Friday.
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