Risk flows continue to dominate financial markets

Here’s what you need to know on Friday, November 11:

The bullish market mood remains intact on the last trading day of the week as investors applaud weak inflation data from the United States and news from China easing Covid-related restrictions. The US dollar index continues to slide below 108.00 after losing more than 2% on Thursday and global equity indices are pushing higher. Bond markets in the United States will be closed on Veterans Day, but Wall Street will operate at regular hours. The US Economic Record will feature the University of Michigan consumer sentiment survey (preliminary) for November and investors will be keeping a close eye on central bank speakers heading into the weekend.

The US Bureau of Labor Statistics announced on Thursday that inflation in the United States, as measured by the consumer price index (CPI), fell to 7.7% on an annual basis in October, against 8.2% in September. Core CPI, which excludes volatile food and energy prices, fell to 6.3% from 6.6% over the same period. With both of these readings lower than market expectations, the likelihood of a 50 basis point Fed rate hike in December jumped above 80% from 50% earlier in the week. In turn, major equity indices in the United States recorded impressive gains, the US dollar suffered heavy losses and the yield on benchmark 10-year US Treasury bonds fell towards 3.8%, losing almost 7% on the day.

US Inflation Analysis: Rising is hard in the fog, the dollar is expected to fall (until the next CPI).

Earlier today, China’s National Health Commission announced that it had decided to reduce quarantine times required for travelers and people who have been in close contact with identified Covid cases. The Shanghai Composite Index was last seen up nearly 2% on the day and Hong Kong’s Hang Seng Index was up 6.8%. Reflecting the risk-friendly market environment, US equity index futures rose between 0.5% and 0.7%.

The UK’s Office for National Statistics (ONS) reported on Friday that gross domestic product (GDP) grew at an annualized rate of 2.4% in the third quarter, compared to market expectations of 2.1% . Other data from the UK showed industrial production rose 0.2% on a monthly basis in September. GBPUSD largely shrugged off the latest data and was last seen moving sideways slightly above 1.1700.

EURUSD posted impressive gains on Thursday and continued to climb during Asian trading hours on Friday. The pair was last seen at its highest level since mid-August, slightly above 1.0200.

USDJPY lost over 400 pips on Thursday and hit a seven-week low near 140.00 before rebounding on Friday. At press time, the USDJPY was up 0.5% on the day at 141.65.

Fueled by falling US Treasury yields, gold the price rose nearly 3% on Thursday and recorded one of its biggest one-day gains of the year. XAUSD is currently trading above $1,750 and it is up almost 5% since the start of the week.

Bitcoin gained 10% on Thursday after losing more than 20% in the first part of the week. BTCUSD, however, appears to be struggling to build bullish momentum early on Friday as markets keep a close eye on developments surrounding the FTX drama. At the time of writing, Bitcoin was down almost 2% on the day at $17,250. Ethereum is trading in negative territory at around $1,250 early Friday after Thursday’s 17% gain.

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