Spreadex Market Update
Oil now 10% off the lows, USD pulls back
USD remains weak ahead of Powell comments tomorrow. Risk sentiment continuing to improve amidst softer USD. AUD & CAD leading in FX while JPY falls on softer safe-haven demand. Gold and silver bid but well withing ranges. Oil rallying firmly on G7 energy talks and fresh Ukraine violence.
Key Factors for Today
- USD weakness continues as traders await Powell comments tomorrow
- Equities continue higher amidst USD weakness
- Commodity currencies leading in FX, JPY falling on softer safe-haven demand
- Muted action in metals market
- Oil prices surging higher on supply concerns, fresh Ukraine violence
Coming Up
- USD US Goods trade balance
- USD US Consumer confidence
- USD US Richmond manufacturing index
USD Softer Despite Better Data Yesterday
The US Dollar continues to trail lower across the European open on Tuesday. The DXY is now on course to print its third consecutive losing day as the sell-off continues. However, it’s worth noting that so far, the index has yet to break down through support, suggesting that we might yet be in store for a further move higher. Both durable goods and pending home sales were seen coming in above expectations yesterday. The key data release today will be consumer confidence which is expected to have fallen back to 100 last month from the prior month’s 106 reading.
Risk Assets Continue to Rally
Equities indices have seen further gains today, for the most part. The ASX, FTSE and Nikkei are all leading the way with solid gains across the European open on Tuesday. While US stocks are mostly in the green, we are seeing a more cautious tone to price moves as traders brace for further comments from Fed chairman Powell, due tomorrow. Keep an eye on the news-flow from G7 meetings which continue today and are adding to the macro backdrop for equities traders this week.
AUD & CAD Lead FX, JPY The Weakest
In FX, commodities currencies have been the strongest performers across late Asian and early European trading on Tuesday. Ongoing softness in the US Dollar as well as better performance from risk assets, is helping drive support for high-beta currencies this week. JPY has once again been the weakest performer in the G10 space, weakened by a lack of safe-haven support amidst the upside we are seeing in risk assets this week.
Gold and Silver Remain Lifeless
In metals markets, we are seeing little to report yet again today. Both gold and silver are mildly bid. However, neither metal has been able to capitalise on the soft patch in USD this week as the gains in equities markets continue to steal the limelight. Both metals continue to trade within recent ranges and traders will now look to see if tomorrow’s comments from Powell can provide the catalyst for any proper moves.
Oil Rallies 10% Off Lows
Oil prices have been firmly higher again today across the European open. Crude futures have now moved more than 10% off the week’s lows. The current upside appears to be drive by a combination of factors including weakness in the US Dollar, fresh escalation in violence in Ukraine as well as the impact of current G7 meetings regarding sanctions on Russian energy. EU leaders are pushing for a price cap on Russian energy supplies which would no doubt add to current market tightness, therefore driving speculative buying of crude this week.
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