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MTrading Team • 2022-08-29

Hawkish central bankers fuelled USD, yields but crude oil stays firmer on supply concerns

Hawkish central bankers fuelled USD, yields but crude oil stays firmer on supply concerns

Jackson Hole Symposium turned out to be a surprise for markets as global central bankers, led by Fed Chair Jerome Powell, chose to propel rates rather than fear recession. The hawkish comments from the various policymakers fuelled the US Treasury yield and the same helped the USD Index (DXY) to renew the multi-year high.

Other than the central banker’s hawkish speeches, fears of economic slowdown also weighed on the market’s mood and favored the greenback buyers.

With this, the US dollar’s strength drowned the prices of Antipodeans and commodities, wherein the base metals lost the most followed by gold. It’s worth noting, however, that the fears of no imminent oil deal between the US and Iran appeared to have fuelled the crude oil.

Surprisingly, key cryptocurrencies could rebound from their monthly lows marked on Friday amid short-covering moves and an off in the UK.

Following are the latest moves of the key assets:

  • Brent oil rises 1.20% as buyers attack $102.00 while justifying Friday’s bullish Doji.
  • Gold drops to the lowest in one-month, down 0.93% to $1,722 at the latest.
  • USD Index refreshed nearly two decade high around 109.50 before retreating to 109.25 by the press time.
  • Eurostoxx and DAX both stay on the bear’s radar with more than 1.5% daily losses for each.
  • Wall Street closed with notable losses on Friday wherein Nasdaq led the bears with 3.94% daily losses.
  • BTCUSD rises 1.7% intraday towards regaining the $20,000 threshold while ETHUSD gains 1.85% as buyers flirt with $1,450.
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Fed-inspired hawkishness began the NFP week

With Fed Chair Jerome Powell’s sturdy force behind the rate hikes, policymakers from the rest of the major central banks also followed the suit despite looming recession fears. The same raised fears that the hawkish attempts could prepone the economic slowdown. Additionally, doubts that the monetary policy alone won’t be able to tame inflation and overcome recession woes joined the Sino-American tussles to exert additional downside pressure on the risk profile, which in turn joined hawkish Fed bets and strong yields to propel the US dollar.

The firmer US bond coupons also fuelled the USDJPY prices as BOJ Governor reiterated his support for easy money policies. On the other hand, neither the ECB policymakers nor Germany’s hints of stimulus could revive the EUR as the energy crisis deepens in the bloc, as well as in the UK.

AUDUSD led the bears among G10 currency pairs despite witnessing firmer Aussie Retail Sales whereas gold dropped nearly 1.0% to convince bears of a fresh yearly low. Further, Brent oil rose over 1.0% on fears of more supply crunch as OPEC+ production cuts loom, in addition to the less likely sooner arrival of Iranian oil.

BTCUSD and ETHUSD surprised market players as they rise nearly 2.0% each despite the US dollar’s strength and the pessimism surrounding the economic transition.

⏫ 🟢 Strong buy: USDJPY

⏬ 🔴 Strong sell: ETHUSD

⬆️ 🟢 Buy: USD Index, USDCAD, Nasdaq

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

All eyes on US NFP

The UK’s extended weekend might offer a sluggish start to the key week comprising the US jobs report for August. However, Fedspeak may entertain traders. Also important will be the second-tier PMIs from the US, as well as the inflation in Eurozone and Germany. It should be observed that Powell’s warning about economic and labor market conditions increases the importance of this week’s US Nonfarm Payrolls (NFP).

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