Fed tapering begins

According to the FOMC meeting of November 2-3, tapering will begin this week as planned. The New York Fed announced its modified bond-purchase schedule last week, confirming that tapering will start this month. Until June, the Federal Reserve intends to keep reducing its purchases by $15 billion each month. There is a possibility of a change in tapering speed, but the Fed has indicated that it will only do so if it is necessary. Futures for the Fed Funds rate are still pricing in a Q2 liftoff of roughly two-thirds, while Q3 is priced in completely. If economic indicators and inflation remain strong, the dollar's recent surge is expected to continue.

President Joe Biden and President Xi Jinping will hold their first virtual meeting tonight, amid heightened tensions between the superpowers on matters like the origins of Covid-19, human rights in Hong Kong and Xinjiang, and the future of Taiwan.

Lagarde’s rate hike commentary

President Lagarde indicated today that a rate hike in 2022 is "extremely doubtful" but added "I do not think I will venture into 2023.". She went on to say that over the medium run, inflation will fall below the 2% target level. While she plainly wants to keep all options open, Lagarde finds herself in a delicate balancing act as several other central banks have already begun to tighten monetary policy.

FX and commodities markets

The US dollar index is falling from the recent high of 95.42 and dollar/yen is diving below the 114.00 psychological number. The British pound hit a new low on Friday at $1.3352, while the euro is struggling to jump strongly higher from the 16-month low of $1.1461. US stock futures are returning to gains, suggesting a positive open again.

Commodity currencies are gaining some ground. The aussie is finding strong support at the $0.7300 level and the kiwi is approaching the $0.7100 number. Dollar/loonie is losing momentum after the climb at 1.2600.

WTI oil prices have dipped below $80/per barrel as traders awaited President Joe Biden's response to rising fuel prices. In the gold market, the price is flattening around today’s high of $1,867/per ounce.

Coronavirus updates

Unvaccinated persons in Austria will be put under mandatory quarantine starting today, the most extreme Western European response to the recent coronavirus pandemic. Last week, Europe had over 2 million cases, the largest in a single week since the pandemic began. After a record number of cases, the Netherlands and Latvia have both implemented new restrictions, while Germany is exploring new measures as a result of the unprecedented increase in infections.