Inflation bumps up yields, China Q3 GDP misses estimates

On Monday, markets kick off the new week with a property slump, and the energy crisis hampered China's projected growth. Brent oil prices continue to dominate the oil market, with Brent reaching a new high above the 85 mark. Higher-than-expected New Zealand inflation helped sellers pull the Kiwi off its one-month high. With bond yields on the rise, the dollar index rose again against other major currencies after falling for three consecutive days, reaching 94.

Chinese markets turned red in response to weak economic growth data. China's gross domestic product (GDP) grew 4.9 percent in the third quarter a year earlier, down 5.2 percent from its forecast. Shares of top companies fell more than 1.5 percent. In addition, the Asian stock market index, MSCI, ended Monday in negative territory after recording its highest five-month growth last week. Blue chips fell more than 1.5 percent. In addition, the Asian stock market index, MSCI, ended Monday in negative territory after recording its highest five-month growth last week.

The corporate earnings releases, which will continue this week, along with rising inflation, helped push the rate of return on 10-year bonds from 1.6 percent and 30-year bonds from 2 percent.

Increasing inflation and energy prices, especially in Europe, have prompted central banks to adopt contractionary policies more rapidly. In his remarks on Sunday, Bank of England Governor Mr Bailey said the bank should take practical steps to prevent inflation from rising, which could accelerate interest rate hikes sooner than expected.

Although markets expect the Federal Reserve to hike interest rates by the end of the next year as it will begin the tapering program by the end of the year, the bank appears to be more patient than investors expect.

GDP eases amid firm USD

The pound fell Monday, hitting the top of its descending channel at 1.37800 and is headed toward its first support level at 1.36900. If this strong level is broken, sellers may be encouraged to extend the decline to 1.35800.

In the alternate scenario, a break of the downtrend line would signal buyers to take control of the market and lead the pound toward the next hurdle at 1.39000.