US Dollar Rallies as Inflation Hits a 30-Year High, Gold Falls

01 Nov 2021 · 3rd Party Analysis

Vector of a USD Note folded with USD Symbol in the back, both over a Candlechart Background. US Dollar Rallies as Inflation Hits a 30-Year High, Gold Falls

WRITTEN BY ThorFX

In Summary:

  • US dollar accelerated on Friday and remains well-bid early Monday, gold drops below $1,800
  • Fed’s preferred measure of inflation rises to a 30-year high at 3.6% on an annualized basis

What’s Trading in the Markets?

The dollar advanced against almost every major currency on Friday and is still trading near its recent highs early Monday. In more detail, the EUR/USD plunged from levels above 1.1700 to levels near 1.1530 on Friday, a decline of 1.2%.

In addition, the USD/CAD and the USD/CHF surged by half a percent or more driven by a strong US dollar. On that note, several factors powered the greenback on the final trading day of October. On the one hand, inflation data showed prices in the US rose at their fastest pace since 1991.

In more detail, core PCE inflation, the one tracked by the Federal Reserve, jumped to 3.6% in September. The 30-year record high could force the US central bank to accelerate its plans to reduce the monetary stimulus.

That said, the Federal Reserve will hold a two-day policy meeting on Tuesday and Wednesday. During the event, central bankers will gather to discuss the pace of withdrawing the $120 billion in monthly asset purchases.

What’s the Latest News on Gold?

Against this backdrop, analysts point out that traders are increasingly seeking a safe haven in the US dollar. As a result, the price of gold tumbled $27, or 1.5%, on Friday. Before the market closed, however, gold bugs injected fresh buying and managed to erase some of the losses. In turn, gold finished Friday’s session at $1,784, lower by 0.8% on the day.

Early on Monday, the precious metal is trading slightly higher, presently gravitating toward $1,785 per troy ounce.

What’s Bitcoin Doing Today?

Cryptocurrencies today are floating near their recent highs. More precisely, as November trading kicks off, crypto backers are confident the new month will be good for digital assets. With this in mind, the price of bitcoin, the original cryptocurrency, floats near $61,000 per coin.

Moreover, the orange coin logged its fifth positive week in a row and is looking to regain its record of $67,000. Still, the leading cryptocurrency needs to add about 9% to its price to reach its all-time high set on October 20th.

What to Expect in the Markets?

Besides the highly important Federal Reserve event on Wednesday, traders and investors will be looking toward Friday’s jobs data. The nonfarm payrolls will highlight the pace of the US economic recovery in October. In other words, the report will show how many new people found jobs.

The nonfarm payrolls data is among the most-watched reports and, therefore, heightened volatility could be expected in the markets.

Economic News Today (EST time)

Looking ahead into the day, market participants today expect the ISM manufacturing PMI data from the US at 11:00 am. Also, the Bank of Japan will publish its monetary policy statement at 07:50 pm. Later, the Reserve Bank of Australia will announce it interest rate decision followed by a rate statement at 11:30 pm.

All economic data today could create increased volatility, allowing traders to find trading opportunities in the broader financial market.

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