Spreadex Market Update
US CPI In Focus As Dollar Correction Deepens
The US Dollar remains under pressure over the European open on Tuesday, extending Monday’s losses. The Dollar Index has now corrected almost 3% from highs and is trading firmly back beneath the prior 2022 highs, broken last week. With market pricing having built up in favour of a larger Fed hike this month, the current move appears more linked to the rebound in sentiment we’re seeing in Europe. With gas prices dropping this week and news of major advances by the Ukrainian army against Russia, sentiment is rallying, drawing attention away from the US for now.
Today holds the potential to cause plenty of USD volatility, however, with the latest US CPI report due. The market is looking for core CPI to remain unchanged on the month at 0.3% and headline CPI to drop to -0.1%. Readings in this region or below will likely keep pressure on USD near-term a=while any unexpected strengths will likely help stem USD losses for now.
Key Factors for Today
- USD falls further as traders await today’s US CPI release
- Risk market continue to rebound amidst USD weakness
- GBP leads in FX boosted by strong jobs data and hawkish BOE expectations
- Safe-havens seeing some strength despite broader risk-on backdrop
- Metals and oil higher, benefiting from weaker USD
Coming Up
- EUR Eurozone ZEW economic sentiment
- USD US CPI
- NZD New Zealand Current Account
Equities Continue to Rally As US Drops Further, Data on Watch
Global stock markets have enjoyed a firm recovery rally so far this week, benefiting from the drop in USD. With the Dollar on the backfoot and a slither of optimism in Europe, we’re seeing broad-based gains In asset prices, with investors shrugging off central bank
tightening and growth concerns for now. Today’s US CPI data will be closely watched by traders and has the potential to either drive markets further higher or cause a sharp reversal lower.
GBP Boosted By Better Jobs Data
In FX, GBP has seen a fresh surge of strength over the European open on Tuesday. The latest labour market data released this morning showed that wages grew again over the last three months, while the unemployment rate was seen falling to fresh cycle lows. Additional tightness in the labour market along with increased pressure from wages suggests the BOE will need to opt for more aggressive tightening when it meets this week, keeping GBP supported here.
Risk Currencies Failing to Lift Off
While USD, has been the weakest performer so far today, NZD has also been a little soft along with AUD. Despite the broader risk-on moves, we’ve seeing a little bit of strength creeping back into CHF and JPY today, suggesting some hesitance ahead of the US CPI
release.
Metals & Oil Rallying on USD Weakness
In the metals and commodities space, both gold and silver were seen trading higher yesterday. Silver prices saw outsized gains, helped by the rally in equities prices. Crude prices were also lifted yesterday. A weaker US Dollar as well as concerns over tight supply
levels are helping keep oil prices under pinned here.
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