Maintaining continuity at the Fed, stocks rally, US data, stronger dollar as yields rise, bitcoin struggles

Powell renominated as Fed Chair

Despite rising pressure from progressive Democrats for a switch at the head of the Fed, President Biden decided that he doesn’t want to change horses in midstream. US stocks are rising as continuity at the Fed remains. Financials surge following Biden’s decision to renominate Fed Chair Powell as financial markets price in more rate hikes and since Lael Brainard got the second top post and not Vice Chair for Supervision. This does not signal the banks are in the clear as they could see an even tougher regulator announced shortly.

US Data

The housing market refuses to cool after existing home sales in October jumped to a 9-month high.  Existing home sales increased 0.8% in October from September to a seasonally adjusted annual rate of 6.34 million homes. Home sales prices are 13.1% more expensive from a year ago and inventories remain tight.

The Chicago Fed National Activity Index dramatically improved from -0.18 to 0.76, with 61 of the 85 monthly individual indicators showing positive movements. The Fed regional surveys have mostly shown the economy got its groove back from the Delta variant and optimism should be high that economic activity will remain strong, but also that pricing pressures are far from peaking.

FX

The dollar popped alongside short-end Treasury yields after reports the White House is planning to stick with Fed Chair Powell. The dollar is seeing strong flows as US stocks attract foreign investors, rate hike expectations move forward, and as the latest COVID surge across Europe diminished prospects of a strong first half of the year for the eurozone.

Bitcoin

Bitcoin is under pressure as the dollar and US equities rally following President Biden’s decision to stick with Jerome Powell to run the Fed.  The Biden administration has also won over more nations in delivering a coordinated effort to tackle surging energy prices. Today was not a good day for inflation hedges and that is why both bitcoin and gold prices are falling sharply.

Bitcoin was ripe for a pullback and it might not be over yet before traders confidently feel a bottom has been made.

Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at info@marketpulse.com. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc.