Crude oil stays pressured after snapping two-week uptrend, focus on geopolitics, Fed inflation

The risk complex remained downbeat early Monday after the weekend headlines suggested growing indecision among the traders about the major central banks’ next moves. Also challenging the sentiment are talks about the Gaza peace accord and China, as well as the US government shutdown.

While the risk-off mood puts a floor under the US Dollar, the greenback struggles to recover after posting the first weekly loss in six in the last. The USD’s weakness, however, appears less convincing as the Fed policymakers push back immediate rate cuts.

Elsewhere, EURUSD edges higher amid the European Central Bank’s (ECB) readiness to keep the rates higher whereas GBPUSD, USDJPY and USDCHF lack clear directions. That said, USDCAD pares the weekly losses amid downbeat prices of crude oil, Canada’s main export item. Further, Gold price prints mild losses after rising for a week.

On a different page, BTCUSD extends the previous week’s retreat and the ETHUSD also pares the four-week upside amid mixed feelings among the crypto traders.

Following are the latest moves of the key assets:

• Brent oil stays pressured around $81.50 after falling the most in three weeks, as well as snapping a two-week uptrend.
• Gold price stays defensive around $2,035 following the first weekly gains in three.
• USD Index remains depressed near 103.90 after snapping a five-week uptrend.
• Wall Street closed mixed while Asia-Pacific stocks edged lower. Further, the shares in Europe and the UK post minor losses during the initial hour.
• BTCUSD and ETHUSD both stay pressured to around $51,500 and $3,100 as they seesaw around the multi-month tops marked last week.

US Dollar consolidates recent moves, Oil drops further amid risk-off mood…

Indecision about the major central bank’s next moves, as well as the geopolitical fears emanating from the US, China and the Middle East, weigh on the sentiment. Even so, growing chatter about the US government shutdown and the US Dollar’s failure to cheer the policymakers’ rejections of imminent rate cuts challenge the commodity sellers. That said, the longer-term US Treasury bond yields retreat but the short-term coupons edge higher, which in turn puts a floor under the US Dollar Index (DXY) and challenges the Gold and crude oil buyers.

Federal Reserve (Fed) Governors Christopher Waller and Lisa Cook joined New York Fed President John Williams and Philadelphia Fed President Patrick Harker to convince the markets that the US central bank will announce rate cuts in the latter part of 2024. In doing so, the policymakers pushed back chatters about the Fed rate actions in March and May while advocating for June.

On the other hand, US President Joe Biden will meet with four Congressional leaders during this week to avoid the looming government shutdown, up for Friday.

European Central Bank (ECB) officials appeared more hawkish and pushed back calls for immediate rate cuts, which in turn exerted downside pressure on the US dollar and fueled the EURUSD price. Notable among them were President Christine Lagarde, Bundesbank Chief Joachim Nagel and Governor of the Bank of Greece Yannis Stournaras. Additionally, an ECB survey showing upbeat Eurozone inflation expectations for the year ahead also underpinned the Euro’s strength and weighed on the US Dollar.

The Gaza peace talks also challenge the US Dollar’s haven demand, especially after the recently mixed US data and a pullback in the long-term US Treasury bond yields, and allow the prices of Gold to grind higher while also testing the Oil buyers.

Meanwhile, a likely increase in the US-China tensions, mainly due to Beijing’s increased patrols near the border with Taiwan and a British survey showing an escalation in the inflation due to the Red Sea tensions put a floor under the U.S. dollar and challenge the crude oil sellers of late.

It’s worth noting that the ECB’s downbeat comments about Bitcoin disappointed the BTCUSD bulls last week as the regional central bank said that Bitcoin's "fair value is still zero."

• Strong buy: USDCAD, USDJPY
• Strong sell: Crude Oil, US Dollar, GBPUSD
• Buy: BTCUSD, ETHUSD, Nasdaq, Gold
• Sell: DAX, FTSE 100, BTCUSD, AUDUSD, EURUSD

Speeches from BoE, ECB officials eyed but US catalysts gain major attention…

Looking forward, policymakers from the Bank of England (BoE) and the European Central Bank (ECB) are up for public appearances and may trigger volatility in the GBPUSD and the EURUSD pairs respectively. However, Tuesday’s US Durable Goods Orders will precede Thursday’s US Core PCE Price Index, also known as the Fed’s preferred inflation gauge, to entertain the traders during the week. Apart from them, talks about the US government shutdown and Federal Reserve policymakers’ comments, as well as geopolitical news surrounding China and the Middle East, will also keep the market players busy.

Overall, it’s going to be another busy week for the traders but the risk-off mood is likely to prevail and can allow the Crude Oil to pare the first weekly loss in three, especially after falling the most since the month-start the previous day.

May the trading luck be with you!