Spreadex Market Update
US Stocks Soar on Debt Ceiling Optimism
Despite no resolution being agreed in the latest round of talks on Tuesday, both Biden and Speaker of the House Kevin McCarthy expressed optimism yesterday that a deal can be agreed in time to prevent an historic US debt default. Biden is now cutting his Asia-Pacific visit short this week in a bid to continue talks. US markets cheered the shift in sentiment around the talks with the S&P seen rallying firmly over the session while the Nasdaq broke out to fresh highs for the year. Focus today will be on the latest US jobless claims, as well as existing home sales and a raft of Fed speakers.
Key Factors for Today
- Markets buoyed by debt ceiling optimism
- USD higher on hawkish Fed comments
- Metals under pressure
- Risk currencies rising alongside USD
Market Movers
- Nasdaq hits fresh highs for the year
- Gold and silver break lower
- DXY pushing higher
- BTC holding in range
Econ Calendar
- GBP Monetary Policy Report Hearing (10.15am)
- USD Unemployment claims (1.30pm)
- CAD BOC’s Macklem Speaks (4pm)
USD Rallies on Hawkish Fed Comments
Despite fresh optimism around the US debt ceiling negotiations which has seen US stocks breaking out, the US Dollar has continued higher into the back end of the week. Fed speakers continue to push back against calls for rate cuts later in the year with a message which has been more hawkish than many were anticipating. Today, focus turns to fed’s Waller, Jefferson and Logan who each speak later. On the back of recent hawkishness from the Fed, pricing for a hike at the next meeting has risen to around 30% from less than 10% last week.
Gold and silver prices have been hard hit this week and are both under pressure across the European open on Thursday. A combination of a stronger US Dollar and higher equities prices is sapping demand for metals. Gold is now testing the mid-April lows around $1970 while silver is now down around 10% from the YTD highs and showing little sign of recovery.
Crypto prices are having a bit of a tricky time of it this week. BTC is holding around the $27240 level, having bounced off last week’s lows. For now, the market appears caught between the downward pressure of a stronger USD and the supporting pressure of higher stock prices. For now, the consolidation is expected to continue until we see a clear directional catalyst emerge.
In FX, we’re seeing an interesting split across markets. USD remains firm today, leading the pack on the back of further Fed hawkishness and increasing expectations that a further hike might take place next month. At the same time, however, we’re seeing risk currencies such as CAD and NZD trading firmly higher also with NZD the second-best performer on the day so far. AUD continues to struggle, however, with data overnight showing an unexpected 0.2% jump in the Aussie unemployment rate last month.
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