Spreadex Market Update
Markets Quiet As Traders Mull Rate Hike Prospects Ahead of Wednesday’s FOMC
The US Dollar starts the new week lightly bid as traders await the headline event on Wednesday. The July FOMC meeting will be the key focal point for traders and is expected to set the directional tone for USD over the near-term at least. The market is pricing in a 75bps hike though, on the back of a record inflation reading in June, there are upside risks. Ahead of the meeting, USD flows are likely to be somewhat choppy as pre-positioning kicks in. Given the split over rate hike expectations, however, we might see more money staying out of the market ahead of the event than usual, keeping USD action relatively constrained.
Key Factors for Today
- USD lightly bid, flows quiet ahead of the FOMC on Wednesday
- Risk sentiment muted, slightly softer amidst USD buying
- JPY firmer on safe-haven demand, CAD weakest on drop in oil prices
- Gold and silver up off Asian lows
- Oil prices turned firmly lower on US rate hike expectations
Coming Up
Very light data sheet today
- EUR German ifo business climate survey
Risk Assets Firmer into Weekend
We’re seeing a cautious start to the week for investor sentiment as traders brace for the FOMC on Wednesday. Better demand for USD across the European open is creating a bit of drag on equities prices with even the Nikkei having softened from the highs printed last week. Flows likely to remain light ahead of the FOMC on Wednesday with equities prices taking their cues from movement in the US Dollar.
Risk Currencies Remain Top in FX
In FX, a better start for the US Dollar is having a dampening impact across the G10. We’re also seeing better demand for JPY amidst the softer start for risk assets this week. Moves have been fairly light so far though CAD is standing out as the weakest performer across the European open on Monday as weaker oil prices drag the currency down. Very light data sheet today so little to alter these flows as develop.
Gold & Silver Rebound
Both gold and silver are trading roughly flat, as of writing. We saw some early selling over the Asian session so buying has kicked in to lift prices a little across the European open. We saw a decent rebound in metals last week as USD softened so there is perhaps some hope that any unexpected USD weakness on the back of the FOMC midweek, might translate into a broader recovery for gold and silver.
Oil Prices Bid on Friday
Oil prices are attracting quite a bit of attention as we start the new week. Crude futures are under heavy selling pressure on Monday, extending the declines seen across the back end of last week as anticipation of further tightening from the Fed weighs on demand expectations. Crude prices have been hit recently by fresh China lockdown concerns, broader recessionary fears and now the reality of a further leg up in US interest rates.
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