Spreadex Market Update
Markets React as Dovish Fed Speak Resets Rally
Monday witnessed a brief pause in the post-NFP momentum as Middle East tensions gripped the financial markets. However, the rally was swiftly reset, largely thanks to dovish comments from Federal Reserve officials. Gold and crude oil experienced significant gains, with the US dollar taking a back seat.
Key Factors for Today
- Gold's Rally Supported by Fed's Signal of No Rate Hikes
- Oil Prices Surge Amid Middle East Tensions
- German Industrial Output Data Raises Recession Concerns
- Aussie Bulls Reclaim 64 Cents After Chevron LNG Shutdown
Market Movers
- Gold gained 1.60% as Fed voters indicated a reluctance to raise rates.
- Crude oil prices rose 4.35% on the first day of Middle East conflict.
- German industrial production declined, fuelling concerns of a recession.
- The Australian dollar strengthened due to supply concerns in the LNG sector.
Economic Calendar
- ECB President Lagarde Speech
- Fed Bostic Speech
- Wholesale Inventories
- Consumer Inflation Expectations
- Fed Waller Speech
- Fed Kashkari Speech
The Big News
Dovish Rhetoric from Fed Voters Boosts Gold
Federal Reserve officials, Philip Jefferson and Lorie Logan, signalled a cautious approach to monetary policy amid rising US yields and tightening financial conditions. Their comments slashed the likelihood of additional rate hikes in November from 27% to just 14%. This dovish stance, coupled with geopolitical uncertainties, propelled gold to a $30 gain, pushing it to $1861 an ounce. The next resistance level for gold stands at $1885 unless it falls below $1850.
WTI Oil Gains Amid Middle East Tensions
Heightened concerns about the Israeli-Hamas conflict potentially expanding beyond Gaza kept oil prices close to their recent high of $87.25 a barrel. However, the day ended with a slight dip to $86.40 per barrel, down 1%, as no significant production disruptions were reported. Short-term support for oil is at $84.90 per barrel, while resistance is expected at $90 per barrel. Notably, hedge funds have become less bullish on rising oil prices, as last week's data revealed.
German Industrial Production Declines Raise Recession Concerns
In August, German industrial production declined for the fourth consecutive month, falling to -0.2% against the expected -0.1%. This concerning trend, driven by declining energy production, has raised fears of a recession in Europe's largest economy. Additionally, ECB's Vice-President Luis de Guindos warned of the impact of high oil prices on inflation, even as he expected inflation to trend downward. The EUR/USD pair saw an uptick due to a weaker dollar on Monday but formed an inside bar with trading limits at $1.06 and $1.048.
Aussie Dollar Reclaims 64-Cent Barrier
The demand for safe-haven assets and concerns about potential supply disruptions in the oil and gas industry have bolstered commodity currencies, including the Australian dollar. The shutdown of Chevron's LNG Tamar platform, driven by safety concerns, provided support to the Aussie dollar due to its proximity to the broader sectors. AUD/USD rose by 0.90% on Monday, reclaiming the 64-cent barrier and leaving 0.6350 behind. The next resistance level for the currency pair is at 0.6447.
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