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Market News 【Market Evening】Bitcoin’s biggest upgrade in four years just happened, Dollar near 16-month high, Gold slides from 5-month peak

【Market Evening】Bitcoin’s biggest upgrade in four years just happened, Dollar near 16-month high, Gold slides from 5-month peak

Gold pulls back from 5-month peak on dollar strength;Dollar near 16-month high as clues on Fed policy awaited; Oil prices slide on expectations of higher supply, weaker demand.

TOPONE Markets Analyst
2021-11-15
322

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Gold pulls back from 5-month peak on dollar strength


Gold prices eased on Monday, pulling back from a more than five-month peak hit in the last session, as a firm dollar dimmed its appeal.


Spot gold fell 0.25% to $1861.21 per ounce and spot silver fell 0.47% to $25.16 per ounce by 17:30(GMT+8).


The dollar index hovered close to a 16-month high, pressuring bullion by increasing its cost to buyers holding other currencies.


Minneapolis Federal Reserve Bank President Neel Kashkari said on Sunday he expects higher inflation continuing over the next few months but warned that the U.S. central bank should not overreact to elevated inflation as it is likely to be temporary.


Euro zone inflation may fall more slowly than earlier thought, partly on persistent supply chain bottlenecks, but the European Central Bank (ECB) must not overreact by removing stimulus too quickly, two ECB policymakers said on Friday.


Gold has benefited from easy monetary policy introduced to spur economic growth during the Covid-19 pandemic, but any hike in interest rates should reduce the non-interest bearing’s metal’s appeal as it raises its opportunity cost.


The Bank of England will be the first major central bank to raise interest rates but whether that initial increase comes as soon as next month or if it waits until early next year has divided economists polled by Reuters.


The number of Americans voluntarily quitting their jobs rose to a record high in September while job openings stayed stubbornly above pre-pandemic levels, a sign that businesses may have to continue to raise wages in order to attract workers.


Dollar near 16-month high as clues on Fed policy awaited


The dollar hovered below an almost 16-month high versus major peers on Monday, as traders awaited fresh clues on the U.S. economy after bringing forward last week bets for a Federal Reserve interest rate hike on the back of red-hot inflation.


The dollar index, which measures the currency against six peers, was little changed at 95.120 from Friday, when it posted its biggest weekly gain since mid-August and touched 95.266 for the first time since July 2020.


The main event on the U.S. economic calendar this week will be Tuesday’s retail sales data, particularly after a survey on Friday showed consumer confidence unexpectedly plunged to a decade low in early November as high inflation wreaked havoc on sentiment.


“It will be important to watch what still cashed-up U.S. consumers do rather than what they say,” considering readings of sentiment were at odds with actual spending during the summer, Ray Attrill, head of FX strategy at National Australia Bank in Sydney, wrote in a client note.


The dollar has been on a tear since Wednesday, when data showed a broad-based rise in U.S. consumer prices last month at the fastest annual pace since 1990, casting doubts on the Fed’s stance that price pressure will be transitory.


Money markets were pricing a first rate increase by July and a high likelihood of another by November next year as of the end of last week.


But gains in the heavily euro-weighted dollar index have also been helped by a droop in the single currency with the European Central Bank appearing unlikely to change its extremely dovish policy settings in the near term against the backdrop of a slowing economy.


The euro was little changed at $1.14455, staying within sight of Friday’s 16-month low of $1.1433.


Later on Monday, ECB president Christine Lagarde will speak before the Committee on Economic and Monetary Affairs of the European Parliament.


The dollar edged up slightly to 113.965 yen, consolidating around 114 since Wednesday.


Sterling rose 0.08% to $1.3421, continuing a recovery from this year’s low of $1.3354, marked on Friday.


The risk-sensitive Australian dollar was stable at $0.7331. It climbed 0.54% on Friday as it rebounded from a more than one-month low of $0.7277 reached the same day.


Oil prices slide on expectations of higher supply, weaker demand


Crude oil prices fell on Monday on expectations of increasing supply, while higher energy costs and rising COVID-19 cases are also seen weighing on demand.


Brent crude oil fell 1.03% to $80.59 a barrel, while U.S. West Texas Intermediate (WTI) crude rose 0.65%, to $78.18 by17:30(GMT+8).


Oil markets have dropped for the last three weeks, hit by a strengthening dollar and speculation that President Joe Biden's administration might release oil from the U.S. Strategic Petroleum Reserve to cool prices.


"The White House has been debating how to tackle higher inflation, with some officials calling for the strategic reserve to be tapped, or halting U.S. exports," ANZ analysts said in a report.


U.S. energy firms this week added oil and natural gas rigs for a third week in a row with crude prices hovering near a seven-year high, prompting some drillers to return to the wellpad.


The oil and gas rig count, an early indicator of future output, rose by six to 556 in the week to Nov. 12, its highest level since April 2020, energy services firm Baker Hughes Co (BKR.N) said on Friday. 


Meanwhile, the Organization of the Petroleum Exporting Countries (OPEC) last week cut its world oil demand forecast for the fourth quarter by 330,000 barrels per day (bpd) from last month's forecast, as high energy prices hampered economic recovery from the COVID-19 pandemic.


Europe has become the epicentre of the COVID-19 pandemic again, prompting some governments to consider re-imposing unpopular lockdowns, while China is battling the spread of its biggest outbreak caused by the Delta variant. 


Russia's Rosneft (ROSN.MM), the world's second-biggest oil company by output after Saudi Aramco, warned on Friday of a potential "super cycle" in global energy markets, raising the prospect of even higher prices as demand outstrips supply. 


Asian shares mixed as investors as inflation worries hover over investors


Shares were mixed in Asia on Monday, with the specter of inflation weighing on sentiment.


Nikkei 225 rose 0.56% to 29,776.80.

Hang Seng Index rose 0.25% to 25,390.91.

Taiwan capitalization weighted stock rose 0.66% to 17,634.47.

S&P/ASX 200 rose 0.36% to 7,470.10.

South Korea KOSPI rose 1.03% to 2,999.52.


Prime Minister Fumio Kishida is due to present a major stimulus package this week, with spending of up to 40 trillion yen ($350 billion).


A recent sharp decline in new coronavirus cases has enabled the country to relax restrictions on business and other activities, and that coupled with the government spending is expected to fuel a solid rebound for the last quarter of the year.


China’s latest data update was a mixed bag, with stronger retail sales and factory output but weaker housing prices and investments in fixed assets.


Bitcoin’s biggest upgrade in four years just happened


The first bitcoin upgrade in four years has just gone live. It is a rare moment of consensus among stakeholders, and it’s a big deal for the world’s most popular cryptocurrency. 


The Taproot update means greater transaction privacy and efficiency – and crucially, it will unlock the potential for smart contracts, which can be used to eliminate middlemen from transactions. 


“Taproot matters, because it opens a breadth of opportunity for entrepreneurs interested in expanding bitcoin’s utility,” said Alyse Killeen, founder and managing partner of bitcoin-focused venture firm Stillmark.


Unlike bitcoin’s 2017 upgrade – referred to as the “last civil war” because of the contentious ideological divide separating adherents – Taproot has near universal support, in part because these changes involve fairly incremental improvements to the code.

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