It’s been a month of dollar weakness and equity gains, propelled by hopes the world has seen peak inflation and a slower pace of Fed rate hikes. The DXY index, which tracks the greenback against a weighted basket of six currencies, has been falling since late September. November saw the biggest monthly decline (-5.11%) since September 2010 though the world’s foremost reserve currency is still up over 10% on the year. If the top is in, is this the start of a downtrend?

Aside from softer price pressures, data like housing and manufacturing has pointed to the broader economy facing rising headwinds. That has added to the list of deterrents for additional front-loading aggressive policy tightening. The euro has lagged some of its major peers but has risen over 5% versus the dollar. Greater fiscal support from governments, lower gas prices and a mild autumn have helped the single currency. A slower pace of ECB hiking, which gained support from the big recent miss in inflation, is also a tailwind.

After seven straight months of falls, gold found support at the start of November at a critical support zone around $1614. The rebound of over 8% last month was the biggest gain since July 2020. The easing of the monetary tightening path has seen bond yields tumble. ETF holdings in the precious metal enjoyed their biggest weekly increase since April into the end of last month. Going forward, much will depend on the dollar and the Fed pivot theme developing further.

Major events of the month, in numbers:

*7.7% US CPI: Risk markets bounced strongly after the annual rise in US CPI was reported at 7.7% in October. That was the smallest increase since January and a sharp drop from 8.2% seen September and from the estimate of 8%. This saw the dollar fall 2.3%, its worst day in seven years. Some Wall Street analysts revived the view that “a decent amount of the inflation will prove to be transitory”. This of course was the word Fed Chair Powell was mocked for using to describe inflation over a year ago. He recently expressed guarded optimism on bringing inflation down and the chance of a soft landing.  

*+11% FTSE All-World stock index: Global equities enjoyed their first back-to-back monthly gains the summer of last year. Hopes that inflation has seen the highs boosted stocks. Prospects of an easing in China’s strict zero-Covid policy have also encouraged risk taking on the back of a potential reopening of the world’s second largest economy. The MSCI Asia-Pacific Index rose 14%, its best 30-day gain in at least 10 years.

*2016 USD/JPY: The yen was one of the best performing majors in November as falling Treasury yields and cheaper energy helped Japan’s currency. It gained 3.72% on the day of the softer US CPI data, its biggest intraday move since 2016. USD/JPY fell over 7% on the month. The 32-year high at 151.94 looks far away now and the major has broken support around 138, which had held in the second half of last month. Longer-term, the yen will be facing a change in the ultra-dovish Bank of Japan governor next April. This could be a huge event for markets.

*$15,460 Bitcoin: The most popular digital currency collapsed to new two-year lows, losing over 16% of its value last month. BTC price performance has given investors up to 77% losses from the highsat $69,000 in November 2021. According to Bank of America, this is now the fifth-biggest crash of all time. The collapse of the digital asset exchange FTX and the apparent scheming of its founder has left many questioning the relevance of digital coins.