Spreadex Market Update
Dollar Rallies Again on Hawkish Fed Comments – CPI In focus Tomorrow
The US Dollar continues to trade higher across the European open on Tuesday. The Dollar Index is now at its highest level since 2002 a traders prepare for a further strong inflationary reading tomorrow. Yesterday, Fed’s Williams noted that the Fed’s short-term rate regime was working well and urged the Fed to press ahead with planned tightening. Looking ahead today we have a very quiet data sheet with the NFIB small business index the only US data to note. Broader focus is now on the June CPI reading tomorrow.
Key Factors for Today
- USD rallies further on hawkish Williams’ comments, traders brace for tomorrow’s CPI
- Risk sentiment weakens further on USD rally
- USD leads the way in FX, GBP falls on Bailey comments
- Gold and silver hold near lows
- Crude futures weaker on Tuesday
Coming Up
- EUR German ZEW Economic sentiment
- GBP BOE’s Bailey speaks
- USD US NFIB Small business index
Risk Sentiment Rocked by Firmer USD
Investor risk appetite continues to weaken across the European open on Tuesday. With the US Dollar on a rampant topside run, equities prices have plunged across the board. With much chatter and speculation about a stronger than expected US CPI reading tomorrow, equities are likely to remain under pressure as the US Dollar retains a firm bid.
USD Leads the Way in FX, GBP Falls on Bailey Comments
In FX, USD continues to lead the pack. Hawkish Fed expectations, bolstered by Friday’s strong jobs data, are keeping USD well supported here. GBP has been among the weakest currencies this week. Yesterday we heard from BOE’s Bailey who reaffirmed his view that despite near-term, upside inflationary risks, UK consumer prices were still likely to fall sharply next year as markets stabilise and supply issues correct themselves. Near-term, however, he said that the bank stands ready to do more if inflation continues higher.
Gold & Silver Pause Near Lows
Gold and silver have both continued lower this week though flows have been much lighter than the heavy declines we saw last week. Despite a firm upside move in USD, both gold and silver are hanging out at lows, suggesting room for a correction higher should we see USD retreat for any reason, such as a miss on tomorrow’s CPI reading.
Oil Lower on IEA Demand Warning
Oil prices are sitting a little lower on the European open on Tuesday. The resurgent rally in USD has created headwinds for oil prices and, despite better trading yesterday, crude futures are in the red today. Recessionary fears and fresh lockdowns in China are weighing on oil prices currently. Today, the IEA warned that oil demand is likely to tumble across the rest of the year, prolonging the energy crisis which has gripped markets this year.
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