The dollar continued its downfall following softer comments from the Fed’s more hawkish members on Tuesday, as the dovish tone weighed on the narrative of peak rates and bolstered investor confidence. The 10-year declined to 4.33%, sending gold closer to record highs.
Chart: EURUSD
Fed officials Christopher Waller and Michelle Bowman, who previously backed higher interest rates, signalled at least a rate pause, boosting investor confidence. The former suggested that if inflation continues its fall, the Fed could even consider rate cuts, while the latter failed to portray her typical hawkish stance. However, Consumer Confidence was seen rising to 102 from 101 expected, with upcoming data all more critical. On Tuesday, the dollar’s demise sent gold soaring 1.30% higher to $2040 an ounce, leaving behind support at $2030. Wednesday has also started on positive footing as the yellow metal reached a May high above $2050.
The Euro market has evidenced a response to the comments made by Bundesbank chief Joachim Nagel in the aftermath of ECB Christine Lagarde’s remarks against rate cuts. The official said on Tuesday that the ECB might hike again if inflation persisted. Meanwhile, bank lending dropped on Tuesday, marking the first fall in eight years. However, a softer dollar boosted EURUSD to 1.10, where it faces multiple resistances to 1.1045. 1.0965 is expected support.
The oil market spiked 2% on Tuesday as inventories dipped by 817K barrels, albeit lower than the 2M barrels expected. The market’s reaction appeared more influenced by Monday’s SPR report showing a rise of 700K barrels and rumours that the delayed OPEC+ meeting will be postponed again. WTI’s rise to $76.50 could continue while the dollar remains weak, eying $78.50 next unless bulls lose the $75 mark per barrel.
BOE’s Jonathan Haskel said yesterday that the labour market is too hot for rate cuts in an environment of high inflation, adding to the higher-for-longer narrative. It follows Deputy Governor Dave Ramsden’s softer comments on BOE’s restrictive stance. The British pound reclaimed $1.27 to complete a 4-day winning streak on Tuesday and remains bid on Wednesday due to a broadly weaker greenback. The GBPUSD pair has support at $1.2625.
The New Zealand dollar has surged following the RBNZ’s latest meeting. As expected, the central bank maintained interest rates at 5.5% but surprisingly hinted at more rate hikes, boosting the Kiwi over 1% higher to 0.62.