Spreadex Market Update
US Dollar Firmly Higher on Safe-Haven Boost
The US Dollar is trading higher into the middle of the week as safe-haven appetite continues to drive demand. The latest round of US debt ceiling negotiations yesterday between Biden and Speaker of the House McCarthy passed without resolution. While Biden expressed optimism deal could be done in time McCarthy noted once again that the two sides were far apart and limited on time. Equities came off as uncertainty took hold yesterday. US retail sales added to bearish sentiment with both the core and headline readings rising by less than expected.
Nikkei Breaking Out
While US stocks came under pressure yesterday, the Nikkei was seen pushing further higher with the Japanese index breaking out to fresh 33-year highs. Data overnight showed that the Japanese economy grew more than expected over Q1, diluting any near-term recession risks. A weaker Yen has been helping feed into higher demand for the Nikkei which looks set to continue to rally against a backdrop of a stronger USD currently.
Fed’s Williams and Goolsbee were the latest policymakers to voice their opinions yesterday. Williams noted that inflation is slowing and moving in the right direction and that the economy is growing and said that there is some lag between the Fed’s monetary actions and the impact being seen on the economy. Commenting on the debt ceiling situation he noted that it would be difficult to predict the proper impact of a default seeing as its never happened before. Goolsbee was then heard speaking in favour of a pause at the upcoming meeting in line with falling inflation noting that May had been a close call for him between hiking or holding rates unchanged.
Gold and silver prices were seen coming un heavy selling pressure yesterday amidst the fresh uptick in USD. With safe-haven demand around debt ceiling uncertainty favouring the greenback for now, metals are pushing lower and look vulnerable to further weakness near-term. XAUUSD is now trading back below $2000 with XAGUSD trading below $24.
In FX, the rally in USD is putting pressure on currencies across the board. However, NZD appears to be bucking the trend with the Kiwi posting solid gains across the European open on Wednesday. JPY has been the weakest performer given the rally in USD. AUD has also been softer today on the back of weaker wages data overnight which suggests the RBA might move back to holding rates unchanged at the next meeting.
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