The Dollar is experiencing a significant day as it breaks through new resistance levels. The $-Index has crossed the 107.00 mark again, driven by both the economic context and the geopolitical situation. In the USA, things are progressing better compared to Europe. Additionally, with the escalation of the Russian-Ukrainian conflict on our soil, the Dollar has regained its role as a safe-haven asset since the weekend. Moscow's targeting of the Ukrainian city of Dnipro with hypersonic missiles, not equipped with warheads, demonstrated the difficulty of intercepting such munitions.
Unraveling the Dollar's Geopolitical Tug-of-War
Economic Context and Dollar's Ascent
The economic context plays a crucial role in the Dollar's upward movement. Existing home sales in the US showed an increase in October 2024, rising by 3.4% compared to the previous month and 2.9% compared to the same month last year. The median sales price also reached a record of $407,200. However, there were also figures indicating a slowdown, such as the contraction of manufacturing activity in the Philadelphia region in November. The Philly Fed diffusion index fell from +10.3 in October to -5.5 in November, with a significant decrease in the number of companies reporting an increase in general activity.Geopolitical Tensions and Euro's Weakness
The Russian-Ukrainian conflict has had a profound impact on the Euro. The widening spread between OATs and Bunds has been helping to weaken the Euro, which is testing its early October 2023 lows against the $. The Euro is losing ground against all currencies, with a -0.6% drop against the dollar at 1.0475, -0.35% against the Swiss franc, and -1.3% against the yen, which is today's big winner. The business climate in France darkened again in November, according to Insee, with its synthetic indicator dropping one point to 96. The political climate is also not favorable, as the survival of the Barnier government is not guaranteed.Impact of Hurricanes on Leading Indicators
The Conference Board announced that the index of leading indicators fell slightly more than expected in October (-0.4% to 99.5), citing the effect of recent hurricanes. The sluggishness of industrial orders was the main contributor to the indicator's decline, along with the drop in the number of hours worked in the manufacturing sector and the rise in unemployment registrations. Despite the temporary impact of the hurricanes, the trade body believes that the indicator still points to 'difficulties ahead for economic activity'.Labor Market and Unemployment Benefits
The Labor Department reported a drop of -6,000 new registrations for unemployment benefits in the USA at the end of the week of November 11. The four-week moving average, which is more representative of the underlying trend, came out at 217,750, down 3,750 on the previous week. These figures provide insights into the labor market and its potential impact on the overall economy.Copyright (c) 2024 CercleFinance.com. All rights reserved.