The US economic data yesterday surprised on the upside. Although interest rates increased as expected, the dollar's gains initially were wiped out, and the Dollar Index ended the day slightly lower.
Oil prices have risen dramatically due to the heightened tensions that are raging in the Middle East. After a gap-up, December WTI has gained nearly 3.5% near $88.50.
Gold is also up after two sessions that were relatively quiet. It's now near $1945, an increase of more than 1%.
The dollar is stronger against the majority of G10 currencies, except for the Swedish krona and the euro. The BOJ has bought bonds on an unscheduled basis, but the yen has not changed much. The Swiss franc also isn't up that much.
After the 10-year yield hit a record high of 0.815% today, the Bank of Japan announced a second unscheduled operation to buy bonds. Separately but not entirely unrelated to each other, some press reports indicated that the BOJ might consider raising its inflation predictions at the meeting scheduled for later this month.
Tomorrow, Japan will release its September trade statistics.
Yesterday, the dollar reached a new marginal high of JPY149.85. This is its highest level since October 3, when JPY150 was breached. Today, it has remained below that level.
Australia releases its employment statistics for September. The average number of jobs created per month in Australia this year is almost 38k, a slower rate than the average of nearly 51k for the first eight months 2022.
As expected, the UK CPI increased by 0.5% in December. The rate year-over-year remained unchanged at 6.7%. The core rate fell to 6.1%, down from 6.2%. This is the lowest since January.
Sterling was contained within Monday's range, and the close was at or near the mid-range. Today, it is still in the range of Monday.
There is little economic activity in the eurozone until the ECB's meeting next week, when there are virtually no chances of a rate hike. Today, the August construction output was released. It fell by 1.1% following a 0.8% rise in July. Today's release is not market-moving. The markets and ECB officials will be able to see next week the preliminary October PMI as well as the September M3 money supply.
The euro has been surprisingly resilient despite the US data being stronger than expected and the sudden increase in US interest rates. The euro fell about a third cent following the US retail sales shock, but it did not reach a new day low.
The US economy has strengthened. Bloomberg's survey shows that retail sales increased by 0.7% - more than double the median. Even the core measure which excludes autos, gasoline and building materials as well as food services grew by 0.6%.
Today, the US will release its September housing permits and starts. The Beige Book prepared by the Fed for the FOMC will be released late in the session. Six Fed officials will speak during the session.
The greenback recovered to its previous high of CAD1.3700 in Canada due to the combination between strong US retail sales and lower than expected price pressures. In the following hours, it trended to almost 1.3620. The US dollar has been trading higher and is expected to reach CAD1.3600.