November kicked off with three main areas in focus:

  1. Surging energy prices
  2. Inflation and interest rate uncertainties, and
  3. The persistence of supply chain disruptions.


The Euro remained lower for the month, recording new lows for the year near 1.1185 against the U.S. Dollar, levels last seen 73 weeks ago, before closing the month 1.95% lower against the greenback, month-on-month. Eurozone Inflation in November was the highest in the recorded history of the single-currency, coming in at 4.9%, driven by soaring energy prices. This higher-than-expected rise may add to the pressure on the ECB to reduce its pandemic emergency purchase program (PEPP) stimulus. The economic bloc, however, is in a difficult position as inflationary news is overshadowed by an unexpected increase in case numbers from the pandemic. The focus expands to include the incoming German Chancellor, Olaf Scholz, and his revitalization plan.

GBP: The GBP was also offered for the month against the US Dollar, touching a 49-week low against the US unit before closing the month a substantial 2.98% lower against the US Dollar for the month. The Sterling’s hold between key levels is firm but unremarkable, with traders scaling back expectations of a BOE rate hike in December.

The Japanese Yen: The Dollar rallied to 58-month highs around 115.50 against the Yen, before retracing to close the month at 113.13, 0.76% lower month-on-month. The BOJ lags behind most of the high-income countries in the tightening cycle, and higher USD yields drive the USD’s gains against the Yen. Diverging inflation (a headline 6.2% in the U.S compared to 0.2% in Japan) has fed into rate expectations that have had traders favor the Dollar over the Yen.


U.S. and European equity markets started the month on a high, having closed October strongly rebounded from an across-board red September. The equity markets, however, struggled through November, with the S&P 500 Index spending most of the month without much conviction higher as expected, before closing the month having shed 0.67% month-on-month, to bring the year-to-date gains to 21.81%. Technology stocks remained supported by big-tech, with the Nasdaq 100 index gaining 1.97% in November, bringing the year’s gain to 25.30%.


Oil was whiplashed by a convergence of factors, to close the month 18.91% in the red, just after hitting 37-month highs in October. The major headwinds have been:

  1. pandemic-driven supply constraints
  2. short-term demand constraints exacerbated at the tail-end of the month by uncertainties around the impact of the new Omicron variant, and
  3. uncertainty of the effect of the first-of-its-kind coordinated effort of releasing strategic petroleum reserves by major energy consumers.

The U.S. said it would avail 50 million barrels (8.25% of the U.S. SPR) of crude from the SPR, in a first-of-its-kind coordinated effort with China, India, Japan, South Korea and the United Kingdom. Also in focus for Oil is December’s OPEC+ decision on production quotas for January. The market expectation is that OPEC+ will pause its 400 thousand barrel a day increase to observe the impact of the new variant on demand.

Focus Ahead:

Covid-19: Developments around the pandemic remain a relevant risk factor for participants to track. During the month of November, Austria imposed a lockdown and announced that it will make Covid vaccines compulsory from Feb 2022, Netherlands ordered non-essential stores to close at 5:00PM, Belgium mandated that all but essential employees work from home four days a week, and Germany considered a full lockdown and mandatory vaccination, amid record daily infections since the start of the pandemic. Things are bad in Europe. The U.K, France, and Poland are also registering record infections since the start of the pandemic, and are considering forms of mandatory vaccination.

As the month came to an end, the World Health Organization declared a new Covid-19 variant named ‘Omicron’, a variant of concern. This introduced a new unknown variable, and markets swiftly reacted by selling off risk, as evidenced by the sharp drop in stocks and commodity prices into the last week of November. Fed Chair Powell recognized that the rise in Covid-19 cases and the emergence of the Omicron variant adds to the inflation uncertainty while posing downside economic risks.

Debt ceiling: U.S. Treasury Secretary Janet Yellen estimates that the US will reach its debt ceiling on December 15. This gives congress till mid-December to strike a deal on the lifting or suspension of the debt ceiling, with the risk of failure being that the US government would default for the first time ever.

Policy tightening: Federal Reserve Chair Jerome Powell adopted a more hawkish tone, signaling tighter policy sooner rather than later so as to ‘make sure that higher inflation does not become entrenched’. Components of the Fed’s mandates – price stability and maximum employment – clashed, and the central bank favored the former. The focus thereafter shifts to when the rate hike cycle will begin, with the terminal rate expected to be below 2%.

This article was written by the Standard Investment Bank Global Markets Department.

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