JASPER’S MARKET SQUAWK 27-09-2023
The Dollar Keeps On Rising
Risk appetite continued to dwindle on the same conspiring factors weighing on markets lately, with the dollar extending gains to fresh 2023 November highs. FTC sued Amazon, and JPM CEO Jamie Dimon added to recent worries of extended rates after remarks that the Fed could keep hiking to 7%. The 10-year hit a fresh 16-year high.
Chart: EURUSD
Key Factors For Today
- Dollar Soars to New Heights as Risk Appetite Shrinks
- Gold Prices Drop as FTC Lawsuit and Dimon Remarks Impact Market
- China’s Influence on European Markets Grows
- UK Recession Concerns Add to Pound’s Poor Performance
- BOJ keeps an eye on the USD/JPY Rate; Intervention Possible
- WTI Crude Oil Rises Above $90 Mark After API, SPR Reports
FTC Lawsuit and Dimon Remarks Weigh on Gold Prices
The dollar rose to new highs as investors looked for more safety following the FTC’s move to sue Amazon on illegal monopoly allegations and JPM CEO Jamie Dimon’s remarks that the Fed could keep hiking rates as it deals with high inflation while growth is slowing. Stocks cratered as yields continued to surge, with gold back to $1900 per ounce and the door to $1885 widely open unless the round support offers a bounce towards $1905. Meanwhile, Consumer Confidence and Home Sales in the US were disappointed.
China Spillover More Evident in Europe Day by Day
A rising risk of a China property market contagion appears to impact the European markets without Beijing stepping up its stimulus plan. Junk dollar bonds are falling as the dollar remains strong while commodity prices fall, exacerbating weakness in other currencies, including the euro. After six days of declines, EUR/USD slid to a fresh March low of $1.0563 on Tuesday and even lower early Wednesday, raising speculation for an extension towards $1.05. Next, resistance can be seen near $1.06. Meanwhile, ECB’s Holzmann (Austria), a noted hawk, said the ECB may still need to be at peak rates.
Cable to Fresh 6-Month Lows as Recession Fears Crip in
Recession fears in the UK appear to affect the pound since the BOE surprised with a hold and post-hold economic data have been pointing to a slowdown, with markets now split on whether there will be another 25bps hike this year. Major bank analysts also expect the pound to end the year lower as traders turn to the dollar for safety while GBP/USD long net positioning experiences a drop. Cable tumbled to a fresh 6-month low on Tuesday at $1.2156 and continues to decent early Wednesday. Without a pullback towards at least $1.22, the way to $1.20 may be paved already.
Risk of BOJ Intervention Raises as Yen Closes in on 150
BOJ official Fin Min Suzuki said that the bank was watching the rate of USD/JPY closely as it peaked at 149. This follows BOJ Governor Kazuo Ueda’s Monday remarks that the bank will not target FX in future guidance. After a 3-day streak, only losing 148.50 may shift the tide to the downside, with chances at 150 remaining elevated.
WTI Advances Past $90 Handle After API, SPR Reports
The American Petroleum Institute (API) reported a build of 1.586M barrels on Tuesday, compared to last week’s draw of 5.25M barrels when economists expected an inventory draw of 1.650M. The Department of Energy (DoE) also reported that the Strategic Petroleum Reserve (SPR) grew by 300,000 barrels last week. Despite the recent mixed performance, WTI rose above the $90 handle barrier again and is on its way to $92 early Wednesday.
On The Docket
- ECB Lane Speech
- S&P/Case-Shiller Home Price
- CB Consumer Confidence
- New Home Sales
- Fed Bowman Speech
- API Crude Oil Stock Change
- BOJ Monetary Policy Meeting Minutes
FX 1-Day Relative Performance (USD)
- Aussie at -0.27%, Kiwi at 0.29% in red
- Euro and Pound down by 0.12% each
- Yen muted, Swiss Franc down by 0.18%
- Canadian dollar is also down a mere 0.04%
- Gold 0.13% lower, Silver craters 1.13%
- Crude and Brent up by 1.03% and 0.98%
- Natural gas 0.98% higher
