Dollar Reinforced by Fed‘s Hawkish Comment This Week

Lebanese Forex Market

The Lebanese Pound (LBP) remained steady within the new official rate of USD/LBP 15,000 by November 11, 2023.

The Lebanese exchange rate to the dollar has stabilized at LBP/USD 89,700 for over a month. This consistency on the parallel market is hinting at a potential return to a peg with a new rate despite that the recent conflict between Hamas and Israel has notably influenced global currencies, gold, and crude oil prices, and contributing to the economic landscape. However, uncertainty and the gloomy outlook of the region as well as the situation in Lebanon would definitely define the stance of the Lebanese currency.

As for the Euro/LBP currency pair, the Euro depreciated against the dollar-pegged LBP with the currency pair going from last week €/LBP 16,093.50 to €/LBP 16,012.50 by November 11, 2023. The Nominal Effective Exchange Rate (NEER) of the Lebanese pound slightly increased by 0.06% standing at 240.13 points on November 11, 2023.

International Forex Market

On Friday November 11, 2023, the USD Index (DXY), which monitors the performance of the US dollar against a basket of its primary counterparts, improved by 0.77% to stand at 105.832. The index’s upward momentum was driven by soaring yields as well as by the Fed Chair’s statement this week claiming that policymakers are not confident that they have achieved a sufficiently restrictive stance to return inflation to the 2% target while stronger growth could warrant higher rate. Saying that, another possible hike could take place in the next meeting or in January.

In turn, the Euro currency depreciated by 0.52% against the US dollar as EUR/USD reached 1.0675 on Friday November 11, 2023. The pair maintained the cautious level waiting ECB comments following Fed hawkish statement regarding further tightening in the market. Lagarde’s speech is expecting to follow the comment of the Federal Reserve adding more pressure on the European currency.

Regarding the UK, the British pound experienced a significant decline of 1.23% by the end of this week and it is expected to continue its losing streak for the near term as the market participants anticipate a sharp slowdown in the UK economy. Hence, the UK economy remained stagnant in Q3 despite economists forecasted a 0.1% contraction.

For other currencies in Europe, the USD/CHF edged higher by 0.45% by the end of this week to stand at USD/CHF 0.9028 despite the growing geopolitical tension in the Middle East, which would usually benefit the safe haven currency especially the Swiss Franc. Additionally, the Chinese and Japanese currencies depreciated respectively by 0.23% and 1.32% to stand at USD/CNY 7.2918 and USD/JPY 151.36 on Friday November 11, 2023.

Elsewhere, the Australian depreciated by 2.35% from the previous week to stand at 0.6360 AUD/USD on Friday November 11, 2023. Meanwhile, the USD/CAD pair increased by 1.07% to stand at USD/CAD 1.3804, by Friday November 11, 2023 driven by a sharp drop in oil prices which contributed to the decline of the Canadian dollar.

Commodities

Gold prices registered a loss of 1.87% as Fed Powell’s comment endorsed further policy tightening this week. Moreover, Middle East tensions eased as traders believe that the war between Hamas and Israel would remain contained. Meanwhile, the release of the US inflation data next week would guide the outlook of the market especially those of the dollar and bond markets.

Crude oil ended the week on a negative territory fueled by speculations surrounding a slowdown in the economies of major oil-consuming nations. In fact, crude oil prices registered a 5.37% loss this week reaching $76.19/barrel on Friday November 11, 2023. The decline could be attributed to the surge in crude oil inventories in the United States and comments from Fed supporting the potential for further monetary tightening which is adding more pressure in the energy sector.