Global Markets Rattled by Inflation Pressures, Dollar Gains

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Principal Points:

• Global markets endure elevated jitters as shifting policies and economic reports increase uncertainty
• US dollar continues to gain across the board; EURUSD keeps near its lowest in 10 months

What’s Moving in the Markets?

The global financial markets are experiencing increased jitters in October. Following mixed economic signals and shifting policies, the global market rebound is now threatened. Several major factors this month have contributed to a slowdown in economic growth. Among them, surging inflation, supply bottlenecks, and rocketing energy prices.

Earlier in the year, the global rebound showed remarkable strength as countries battled to defeat the threat of Covid-19. Now, however, as the market is already in the final quarter of 2021, the sharp momentum has been quickly fading.

That said, a record jump in inflation is seen in almost every major economy. The US, for example, has been reporting inflation well above 5% on an annualized basis for the past several months.

In the meantime, the US Federal Reserve is looking to end its monetary support by mid-2022. Starting as soon as November, the US central bank will be reversing its easy-money policies. In particular, the monetary stimulus of $120bn in monthly bond purchases will be reduced.

What’s the Big Picture for Traders?

Against that backdrop, traders and investors are having a hard time digesting recent reports from advanced economies. The non-farm payrolls, especially, showed Friday the US economy grew by just 194,000 new jobs in September. In practice, US employers added significantly less than the anticipated 500,000 new hires.

Furthermore, the spike in energy prices has been felt globally and reflects problems related to supply disruptions and rising inflation. In turn, this could prompt central banks to aggressively unwind their support in efforts to curb a historical jump in prices.

What to Watch in the Markets?

With that in mind, forex traders have been pushing the US dollar to higher grounds. The EURUSD pair, for example, has declined over 6.5% so far this year. The GBPUSD value has also been hurt by a rising US dollar. The sterling has lost about 4% against the greenback since early June.

Moreover, the elevated volatility in the US dollar is likely to stay this week as the market awaits key data. Fed minutes from the last meeting near the end of September are slated for Wednesday. The meeting summary will highlight the main topics among central bankers ahead of the expected tapering. In addition, fresh inflation data, also on Wednesday, will reveal if prices in the US have moderated to lower levels.

What’s Moving the Price of Bitcoin?

In cryptocurrency markets, the price of bitcoin has been surging so far in October. By the numbers, the orange coin has added about 35% to its value over the past 10 days. The rally in bitcoin’s price reflects an improving outlook for crypto under certain forms of regulations.

After Securities and Exchange Commission Chairman Gary Gensler said he does not intend to ban bitcoin, cryptos have gained momentum. In detail, the entire market value of the crypto space has topped $2.3tn after hovering below the $2tn milestone for several weeks.

Adding to the positive developments over the crypto industry, a JPMorgan report highlighted institutions are increasingly flowing into bitcoin. “Institutional investors appear to be returning to bitcoin perhaps seeing it as a better inflation hedge than gold,” JPMorgan said.

As a result, the price of bitcoin jumped to a session high of $56,700 early on Monday. The level was a new monthly high for the original coin.