The market’s risk profile turned weak as indecision among the Fed policymakers, especially after the last week’s strong US data, joined escalating coronavirus fears from China.
As a result, the US Dollar defends the previous weekly gain amid a rush for risk safety. The same weighed on the commodities and Antipodeans. Among them, crude oil prices dropped the most as demand woes escalate and supply fears eased, mainly due to China’s covid conditions and easing fears from Russia.
AUDUSD justifies its risk barometer status while GBPUSD has an additional negative, namely Brexit, to trim some of its latest gains.
Cryptocurrencies continued portraying the market’s fears as FTX-inspired shock isn’t forgone and suggests more hardships for the BTCUSD and ETHUSD.
Following are the latest moves of the key assets:
Previous optimism fades
As Federal Reserve authorities retreat from their previous view of clearly supporting an easy rate hike in December, the earlier hopes of quickly overcoming the looming recession woes fade. That said, strong US data suggests more needs to be done before normalizing the policy. Even so, Fed’s Bostic mentioned that he’ll not support the 75 bps rate hike in the next meeting.
Further, Beijing's most populous state and a district in Guangzhou are badly hit by the fresh covid woes from China, which in turn offer an additional challenge to the economic recovery expectations. It’s worth observing that the PBOC’s inaction couldn’t save the CNY bulls amid fears of more economic pain ahead.
Elsewhere, indecision over the UK’s new government’s view on Brexit, even if Tories are always in for a hard one, seemed to have allowed the GBPUSD buyers to take a breather after a two-week uptrend.
The US Dollar manages to remain firmer even if the US Treasury yields remain pressured.
It should be noted that the fears of higher rates, softer growth and easing geopolitical woes, not to forget China’s virus conditions, all allow the oil bears to cheer the four-day downtrend. The gold price, however, remains less infected due to the increase in physical demand.
On a different page, expectations of harsh crypto regulations, especially after the FTX saga, join a few more looming break of the lead e-currency exchanges to weigh on the prices of BTCUSD and ETHUSD.
Risk catalysts are the key
Given the lack of major data/events on Monday, the market may continue to observe the aforementioned qualitative factors for clear directions. As a result, the week-start risk aversion may prevail, even with a softer pace. Even so, the hopes of economic recovery and likely softer rate hikes could challenge the bears ahead of this week’s key PMIs and central bank announcements.
May the trading luck be with you!