Central banks, Russia propel risk-aversion and propel US dollar

Trade the news on September 22 2022

Be it the Fed’s hawkish hike or global criticism of Russian President Vladimir Putin’s troop mobilization plans, not to forget fears surrounding China’s economic weakness, everything contributed to the risk-off mood during late Wednesday. The sour sentiment remained on the table amid early Thursday as a few more central banks are up for battling the inflation.

However, a lack of major unexpected macro leads traders towards consolidating the previous day’s losses in certain asset classes.

Even so, the US dollar remains firmer after refreshing the two-decade high while prices of gold drop. Further, crude oil snaps a three-day downtrend with mild gains amid supply fears.

USDJPY gained the most among the major currency pairs while EURUSD occupied the other horizon.

Cryptocurrency pairs also lick their wounds at monthly lows as traders await more clarity on regulation and economic transition.

Following are the latest moves of the key assets:

  • Brent oil bounces off weekly low to snap three-day downtrend near $91.00.
  • Gold drops back towards the two-year low, down 0.80% near $1,660.
  • USD Index rises to the fresh 20-year high near 111.60.
  • DAX and Eurostoxx both print mild losses but the FTSE is up 0.30% at the latest.
  • Wall Street closed in the red led by the Nasdaq’s 1.79% daily loss.
  • BTCUSD prints mild gains around $18,950 while ETHUSD struggles below $1,300.

Fed, Ukraine and China offer trifecta attack on sentiment

US Federal Reserve matched market expectations of 75 bps rate hike and so did the Swiss National Bank (SNB) whereas the Bank of Japan (BOJ) bucked the hawkish trend by keeping the monetary policy unchanged. Fed Chair Powell roiled the market’s risk profile while suggesting more pain on the way to taming inflation while Russia doesn’t seem to fall back despite broad resistance to deploying more militaries around Ukraine. Furthermore, China’s economic recovery is in the doubt and exerts additional downside pressure on commodities, as well as the Antipodeans.

GBPUSD dropped to the fresh low since 1985 before the latest rebound ahead of the Bank of England (BOE) monetary policy announcements. USDCHF also remains firmer as SNB matched wide market forecasts.

Geopolitical fears keep the oil prices floating around the recent lows but recession woes keep the energy benchmark pressured.

Elsewhere, anticipated hardships from the SEC joined the broad US dollar strength to weigh on the BTCUSD and ETHUSD before the latest consolidation around the lowest levels in three and two months respectively.

⏫ 🟢 Strong buy: AUDUSD

⏬ 🔴 Strong sell: ETHUSD

⬆️ 🟢 Buy: USD Index, USDCAD, Nasdaq, USDJPY

⬇️ 🔴 Sell: DAX, FTSE 100, gold, BTCUSD

More rate hikes and the USD strength ahead

As most of the central banks are up for raising rates to battle the inflation woes, as well as stay ready to witness economic hardships due to the same, the global markets are likely to witness pessimism during the rest of the week. As a result, the US dollar may witness further upside and can weigh on the prices of commodities and Antipodeans. It’s worth noting, however, that the PMIs can entertain traders as well.

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