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MTrading Team • 2023-03-14

Crude oil stays depressed as Dollar rebounds ahead of US CPI

Crude oil stays depressed as Dollar rebounds ahead of US CPI

Global markets remain cautiously optimistic during early Tuesday as the latest bank fallouts in the US raised hopes of the Fed’s policy pivot. The mildly bid markets, however, struggle amid a corrective bounce in the US Treasury bond yields, which in turn allowed the US Dollar to pare the biggest daily loss in two months.

With the US Dollar’s rebound, as well as looming fears of the financial crisis, the Crude Oil price reverses the previous day’s U-turn from the lowest levels in nine weeks. It should be noted, however, that the Gold traders seem optimistic amid expectations of no Fed rate hikes, even if the USD rebound probes the XAUUSD bulls.

EURUSD drops the most among major currencies as market players anticipate the US-like bank failures in the bloc whereas the contagion fears are famous. Further, the GBPUSD pares intraday losses after the UK prints less pessimistic employment numbers than feared.

Elsewhere, BTCUSD remains firmer at the monthly high while ETHUSD retreats from the three-week high marked earlier in the day.

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Following are the latest moves of the key assets:

  • Brent oil extends the previous day’s losses to $80.00, down 0.85% intraday at the latest.
  • Gold prints mild losses but struggles for clear directions around $1,910.
  • USD Index licks its wounds near 104.00 after falling the most in two months the previous day.
  • Wall Street closed mixed and so did equities in the Asia-Pacific region but shares in Europe and the UK print minor losses of late.
  • BTCUSD and ETHUSD lack clear directions as bulls take a breather around $24,350 and $1,675 as we write.

Mixed feelings ahead of US inflation numbers

Although fears emanating from SVB and Signature Bank subsided during early Tuesday, the risk-on mood has its limitations amid a sudden shift in the market’s bets on the Federal Reserve (Fed) action, from expecting a 50 bps rate hike in the last week to policy pivot at the latest. Also challenging the risk-on mood could be the geopolitical concerns surrounding China and Russia.

That being said, the US Dollar licks its wounds as traders expect today’s US CPI data to renew inflation woes and underpin the greenback’s haven demand, especially after the latest bounce in the US Treasury bond yields. It’s worth observing that the receding inversion between the 10-year and two-year Treasury bond yields tame recession fears and weigh on the USD Index.

GBPUSD battles with the firmer US Dollar amid an absence of downbeat UK employment data, as well as due to the British government’s readiness for more fiscal measures to revive the developed economy. On the other hand, EURUSD reverses the previous day’s gains amid geopolitical and economic fears surrounding the oil continent.

Gold price lacks clear direction after rising the most in four months as traders remain confused between a reduction in the hawkish Fed bets and hopes of a US rebound. Alternatively, the Crude Oil drops for the second consecutive day while fading the late Monday’s corrective bounce off the lowest levels since early January. Brent Oil’s selling could also be linked to the hopes of a reduction in the global oil demand ahead of this week’s key supply-demand reports.

Talking about cryptos, BTCUSD and ETHUSD bulls take a breather around the monthly high amid hopes of more US dollar selling and options market optimism.

  • Strong buy: USDJPY
  • Strong sell: ETHUSD, GBPUSD
  • Buy: USD Index, USDCAD, Nasdaq, EURUSD
  • Sell: DAX, FTSE 100, gold, BTCUSD, AUDUSD

US inflation is the key

Although chatters surrounding the US banking sector health, due to the latest fallouts of the SVB and Signature Bank, challenge the market’s optimism, hopes of no contagion effect and the government’s readiness to do whatever it takes to defend the economy favor USD buyers. It should be noted that the recent blow to the Fed bets, per the interest rate futures, could drown the US Dollar in a case where the US CPI for February prints downbeat figures.

May the trading luck be with you!