US Markets Offline Today after Volatile Week

USD starts the week lower as traders focus on growth concerns, US markets offline today for bank holiday. Equities markets most stable on Monday following sharp losses last week, near-term outlook remains vulnerable to further losses. CHF remains strongest in FX following last week’s SNB hike. GBP getting hit by recession fears in the UK. Commodities see a muted start despite USD weakness today. 

Key Factors for Today

• USD weaker on Monday on growth fears

• US markets offline for bank holiday 

• Risk assets stabilise following last week’s losses

• CHF still strongest in FX following surprise SNB hike

• GBP weakest on recession fears in UK

• Commodities muted following US rate hike

Coming Up

• GBP BOE’s Mann speaks

• USD Fed’s Bullard speaks

• NZD Westpac consumer sentiment

USD Weaker as Traders Focus on Growth Concerns

The US Dollar starts the new week with a more offered tone though quieter flows are expected with the US out for a holiday today. The Dollar index is currently sitting around 1.4% off last week’s highs. The aggressive 75bps hike from the Fed last week, along with firmly hawkish signals of further hiking to come this year, has failed to fuel a fresh rally in USD. Recession concerns are growing in the US, highlighted by the Fed downgrading its growth outlook for the year ahead. Today, traders will be looking to Fed’s Bullard, the first Fed member to speak post-FOMC, for further clues into the Fed’s assessment. 

Equities Broadly Stable Following Heavy Losses Last Week

With the US Dollar on the backfoot across the European open on Monday, it’s been a better start for equities markets. Risk assets are seeing broad demand though volume is better in some markets than others. The FTSE is up around 1% off the day’s lows while the Nikkei is in the red today, trading over 2% lower as JPY makes better gains. It’s a timid start for equities given the broader recession concerns which make markets vulnerable to further downside this week. 

CHF Remains Strongest in FX, GBP Weakest 

In FX, CHF started the week as it ended; the strongest currency in the G10 bloc. Last week’s surprise rate hike from the SNB, along with guidance of further hikes to come, has created a massive shift in narrative for the Swiss currency, fuelling huge inflows. GBP has been the weakest currency over late Asian and early European trading on Monday. A concerned tone from the BOE last week along with a recent string of worse-than-expected data has sharpened the focus on recession concerns in the UK. 

Metals Back in Ranges

A muted start for metals with both gold and silver back in their recent ranges. We saw volatility last week around key risk events. However, neither metal has managed to make a proper directional move. If USD weakness continues over the week, this will likely underpin metals while a surge in USD will send them lower. 

Oil Falls Despite US/Iran Sanctions News

Despite the soggier tone to the dollar today, oil prices have started the week under offer. Crude futures are now down more than 12% from recent highs. Global recession fears, as well as higher US rates, are taking their toll it seems. Over the weekend news of fresh US sanctions on Iran put an end to any near-term hopes of a fresh agreement between the US and Iran. Given that the US had been trying to secure fresh oil supply from Iran to help calm prices, it will be interesting to see how this places out in oil prices this week.