Spreadex Market Update
USD Starts The Week Confidently Ahead Of Wednesday’s FOMC
The US Dollar is beginning FOMC week with a bid tone, seeing the Dollar Index bouncing back of last week’s lows. Traders are eyeing a further 75bps worth of tightening at the event on Wednesday. However, the main focus will be on the Fed’s guidance, with some players now expecting the Fed to signal a potential slowing of rate hikes after this month. This perspective has moved back into focus recently, driving the USD correction lower we’ve seen in recent weeks. However, with CPI will at record highs, many argue that it is still too soon to call for a “Fed pivot”, putting a great deal of emphasis on this event.
Key Factors for Today
- USD stronger as traders look to Wednesday’s FOMC
- Equities softening at start of week – US earnings continue today
- EUR under pressure over CPI fears
- Metals and oil suffering under stronger start for USD
Coming Up
- EUR Eurozone flash CPI
- GBP UK Net lending / mortgage approvals
- USD US Chicago PMI
Equities Fall Back on Fresh Dollar Bid
Equities markets are seeing a softer start to the week in light of the better ton USD trading. Global indices posted strong gains last week, however, and many will be looking for the rally to continue this week if USD falls back around the FOMC. Any sign of a forthcoming Fed pivot on Wednesday will be good news for equities markets while any sign of the Fed reaffirming its commitment to tightening will likely drag equities prices lower near-term.
Exxon & Chevron Post Huge Gains
US earnings season continues this week. Arista Networks will be the only company reporting today while tomorrow sees big names such as Pfizer, Airbnb and Uber reporting Q3 results. On Friday, Exxon and Chevron were both seen posting massive profits again. Chevron saw profits of $11.2 billion on the quarter, well above estimates, though slightly down from the prior quarter.
USD Starts the Week Strong – EUR Traders Awaiting EZ CPI
In FX, a stronger start to the week for the US Dollar is weighing on risk currencies. However, it’s EUR and CHF which have seen the weakest performance across the European open on Monday. EUR traders are bracing for the latest CPI figures due this morning, likely to put further pressure on the ECB if prices are seen holding at recent, record highs. Given the slowing we’re already seeing in the eurozone economy, further CPI increases would be a big risk factor for growth, likely dragging EUR lower here.
Metals & Oil Capped by Fresh USD Rally
In the metals and commodities space, both gold and silver are turning lower on Monday as a resurgent US Dollar weighs on the metals market. While both gold and silver are off the YTD lows for now, any proper move higher in USD this week will likely see these levels tested near-term. Oil prices are under pressure today also, linked to a stronger US Dollar. One of the key themes we’ve heard from energy companies reporting in the US, is concerns bout a projected slow down over the end of the year and into next year which is weighing on the demand outlook for oil, creating headwinds for prices.
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