U.S. Dollar Rebounds As Bullard Says Fed May Need To Raise Rates By 100 Bps

Key Insights

• U.S. dollar rebounds after the recent sell-off. 
• GBP/USD declines after Jeremy Hunt presents a new fiscal plan for the UK. 
• AUD/USD is under strong pressure amid a broad pullback in commodity markets.

U.S. Dollar Rallies As Bullard’s Comments Show That Fed Remains Hawkish

U.S. Dollar Index rebounded towards the 107 level as traders reacted to hawkish comments from Fed’s Bullard. St. Louis Federal Reserve President Bullard said that the interest rate had not reached the sufficiently restrictive level. According to Bullard, the Fed may need to raise rates by at least another full percentage point.

Traders also focused on the economic data from the U.S. Housing Starts declined by 4.2% month-over-month in October, while Building Permits decreased by 2.4%. High interest rates continue to put pressure on the housing market.

Initial Jobless Claims report indicated that 222,000 Americans filed for unemployment benefits in a week, mostly in line with the analyst consensus. Philadelphia Fed Manufacturing Index declined from -8.7 in October to -19.4 in November.

Treasury yields rebounded after the recent sell-off, providing material support to the U.S. dollar. In case this rebound continues, the U.S. Dollar Index will have a good chance to settle above 107.

EUR/USD Failed To Settle Above 1.0400

EUR/USD pulled back towards 1.0340 as traders continued to take profits after the recent rally.

The final reading of the Euro Area Inflation Rate report indicated that Inflation Rate increased from 9.9% in September to 10.6% in October, compared to analyst consensus of 10.7%.

This minor adjustment does not change the big picture for the Eurozone, which is under significant pressure due to high energy prices.

GBP/USD Retreats As Traders Worry That New Fiscal Measures Would Hurt The Economy

It was a big day for GBP/USD traders as British finance minister Jeremy Hunt presented the new fiscal plan. Valued at 55 billion pounds, the plan includes tax hikes and spending cuts.

The market is worried that the new plan would put too much pressure on the British economy, which is already in recession that is set to continue in 2023.

Currently, GBP/USD is trying to settle below the support at 1.1790. In case this attempt is successful, it will move towards the next support level at 1.1760. A successful test of the support at 1.1760 will push GBP/USD towards the support at 1.1730.

On the upside, the nearest resistance for GBP/USD is located at 1.1830. If GBP/USD manages to settle back above this level, it will move towards the resistance at 1.1855.

AUD/USD Is Under Strong Pressure

AUD/USD declined towards the 0.6650 level amid a broad sell-off in commodity markets.

Other commodity-related currencies have also found themselves under pressure. NZD/USD settled below the 0.6100 level, while USD/CAD made an attempt to settle above 1.3400.

USD/JPY Gets Back Above The Key 140 Level

USD/JPY settled above the 140 level and is trying to settle above the resistance at 140.60.

The hawkish comments from Fed’s Bullard reminded traders about the huge difference between the policies of BoJ and Fed. In case USD/JPY settles above 140.60, it will have a good chance to develop sustainable upside momentum.

For a look at all of today’s economic events, check out our economic calendar.