Spreadex Market Update
Dollar Drops From Highs Despite Better Retail Sales
The US Dollar starts the new week on a softer footing with the Dollar Index continuing to correct lower from last Thursday’s highs.
The selling comes despite retail sales and consumer sentiment both beating expectations on Friday and likely reflecting the market’s reaction to recent comments from Fed’s Waller and Bullard who both suggested that a 75bps hike would likely be enough this month, pushing back against the idea of a larger 100bps hike. Given the level of hawkish expectation within the USD market at present, the greenback is susceptible to correction on any minor disappointment for bulls.
Key Factors for Today
- USD lower despite stronger retail sales data as traders react to Fed commentary on hike preferences
- Equities enjoying rebound amidst current USD weakness
- Risk currencies leading in FX, EUR & GBP higher also amidst USD weakness
- Safe-havens lower on reduced hedging demand
- Gold and silver rebounding
- Crude up around 7% from last week’s lows
Coming Up
- GBP BOE’s Saunders speaks
- CAD Canadian housing starts
- USD TIC long-term purchases
USD Softer Following Fed Rates Commentary
It’s a much better start this week for risk assets with equities indices rallying across the board, taking advantage of the lull in USD. With very little on the data sheet today, current flows look likely to continue meaning USD should remain under pressure, allowing equities more room to move higher. Away from USD, however, there are still risks to monitor such as the COVID/lockdown situation in China and the continuing impact of the Ukraine/Russia war.
Risk Currencies Bounce Back in FX
In FX, we’ve seen a reversal of recent themes with USD the weakest among the G10 currencies today. Risk currencies are trading with a much better tone across the European open on Monday, given the improvement in risk sentiment. AUD is trading higher today as traders await the release of the latest RBA meeting minutes overnight, likely to give the Aussie a further boost in light of the RBA’s hawkish outlook. EUR and GBP are both capitalising on USD weakness today also while CHF and JPY are subdued, along with USD, on reduced safe-haven flows.
Gold & Silver higher
Gold and silver prices are seeing better demand today also. Following heavy selling last week, which saw both metals dragged down to fresh 2022 lows, both metals are in demand today. Silver prices appear to be fairing a little better than gold, helped also by the rebound in equities. However, the overall tone remains bearish and risks are skewed towards further downside this week.
Oil Rebounds Off Lows
Crude prices are trading with a better tone as we start the new week. Following plenty of two-way action last week, crude prices have been firmly higher across the European open on Monday, helped by the weaker US Dollar. Crude futures are now around 7% up from last week’s lows, with more upside to come if the current Dollar pullback continues this week.
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