Spreadex Market Update
Quiet Start on Monday As Traders Brace For Friday’s US Labour Reports
The US Dollar is trading very lightly across the European open on Monday. Despite a fresh show of strength last week, the Dollar Index failed to break out to new highs, and, from a technical perspective, there are risks of a downside correction from the current setup. Recession risks and Fed tightening expectations continue to underpin the Dollar here. However, with other central banks pressing ahead with similar tightening, USD is at risk of losing its advantage. This week, the main focus for markets will be the June US labour reports due on Friday.
Key Factors for Today
- USD muted, bank holiday today - quiet flows expected ahead of US labour reports on Friday
- AUD leads the way in FX ahead of expected RBA rate hike overnight tonight
- Equities markets mixed, US and Asian stocks lower, European stocks higher
- Gold prices clinging to support, silver at lows
- Oil muted following OPEC-driven sell-off
Coming Up
- CAD Canadian manufacturing outlook
- NZD NZIER Business Confidence
- AUD AIG Construction index
Equities Trading With Mixed Tone
Equities markets are trading with a mixed tone as we start the new week. We’ve seen selling in the Nikkei and US asset markets while the ASX and the FTSE are both trading higher across the European open on Monday. Broadly speaking, the backdrop remains risk-off given the recessionary fears dominating conversation. If USD loses any ground this week, however, equities are likely to find room to recover while a further rally in USD should send equities prices reeling.
AUD Stronger as Further RBA Rate Hike Eyed
In FX, the softer weekly open for USD has seen better demand for AUD and NZD which have both been the strongest performers over the European open on Monday. The RBA is widely expected to announce a further 50bps hike when it meets overnight for its July rates meeting. CHF is also trading firmly today. The latest Swiss cpi number came in above forecasts this morning, keeping SNB rate-hike expectations in place ahead of the next meeting. JPY has started the week as the softest currency, giving up some of the gains seen last week as the currency rallied on strong safe-haven demand. Should risk sentiment deteriorate once again this week, however, JPY is likely to return to form.
Gold Clings to Support
The metals complex is starting to pique trader interest again after months of laboured, range-bound moves. Silver broke out to fresh 2022 lows last week and is under pressure again today across the European open. Gold prices are now starting to show bullish reversal risks after initially breaking below key support before closing back above, creating a potential triple bottom structure.
Oil Stabilises Following OPEC-Selling
Oil prices have seen muted action so far across the European open on Monday. Price were knocked sharply lower last week on news that OPEC will ramp up production across this month and next, bringing forward the end date to its program of output increases. With market tightness still a key issue, upside risks remain. However, a firmer US Dollar has been a limiting factor recently.
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