Spreadex Market Update
US Dollar Fights Back As Hawkish Fed Expectations Return
The Dollar is seeing fresh demand on Monday as traders continue to digest data developments from Friday. A stronger-than-expected core retail sales figure for March, along with better-than-forecast US bank earnings has seen pricing for May rate hike surging higher. On the back of the data, which painted a more resilient picture of the US economy than many were expecting, traders are now pricing in a .25% hike in May. With little in the way of key US data until later in the week, focus is likely to stay on US earnings season with several big names due this week including Morgan Stanley and Goldman Sachs tomorrow. If banking sector earnings continue to hold above forecasts, this should increase hawkish expectations for May keeping USD supported.
Markets Reversing on Fresh Dollar Strength
A stronger US Dollar has thrown a spanner in the works for many markets. Both gold and silver were seen reversing sharply from last week’s highs as the Dollar rallied on better data. If hawkish Fed expectations develop further as a theme this week, we might see deeper selling in both metals as the Dollar climbs higher. On the back of the recent bull moves, however, there is room for correction. The silver outlook should remain bullish medium term while price trades above support at $24.5377 and for gold, while above $1960.91.
The rally in USD has seen selling interest taking hold in crypto also. Bitcoin futures are seen reversing from highs as traders take profits on the recent rally. US bank earnings this week hold the potential to drive selling further if better performance among big lenders continues to be seen, driving hawkish Fed expectations. BTC has dipped back under the $30k mark this week after breaking higher last week for the first time since early 2022.
In FX, CAD has been the strongest currency in the G10 space across the European open on Monday. Higher oil prices are helping keep CAD supported here with strength seen in particular against JPY which has weakened due to softer safe-haven demand. Equities markets were seen higher across the board on Friday on better US data and earnings. However, a stronger USD is offsetting these gains so it will be interesting to see which takes centre stage this week.
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