Month: July 2022

Gold breaks below $1,700 on prospects of higher rates and a stronger dollar

Posted on by Vrasidas Neofytou

On top of that, the soaring U.S bond yields driven by Fed’s aggressive tightening stance have also lifted the U.S. dollar to 20-year highs against major currencies, making the dollar-denominated gold more expensive for buyers holding other currencies.

Gold is also losing safety and inflation-hedge bets as the surging interest rates are making more attractive the safe and yield-bearing greenback vs bullion such as gold and silver which pay no yield.

The prospects of more interest rate hikes by the Federal Reserve and European Central Bank to tackle the 40-year record-high inflation have added pressure to the rate-sensitive and non-yielding yellow metal, which retreated off yearly highs of $2,070/oz in early March (after the Russian invasion of Ukraine) to below $1,700/oz support level, down nearly 18% in just 4 months.

The European Central Bank is expected to raise rates by 25bp or 50bp for the first time in 11 years later today on Thursday to fight inflation that climbed by more than 8% in Eurozone, while the Federal Reserve is widely expected to raise rates by 75 bp at its July 26-27 policy meeting.

On top of that, the soaring U.S bond yields driven by Fed’s aggressive tightening stance have also lifted the U.S. dollar to 20-year highs against major currencies, making the dollar-denominated gold more expensive for buyers holding other currencies.

Gold is also losing safety and inflation-hedge bets as the surging interest rates are making more attractive the safe and yield-bearing greenback vs bullion such as gold and silver which pay no yield.

Gold, Daily chart

The prospects of more interest rate hikes by the Federal Reserve and European Central Bank to tackle the 40-year record-high inflation have added pressure to the rate-sensitive and non-yielding yellow metal, which retreated off yearly highs of $2,070/oz in early March (after the Russian invasion of Ukraine) to below $1,700/oz support level, down nearly 18% in just 4 months.

The European Central Bank is expected to raise rates by 25bp or 50bp for the first time in 11 years later today on Thursday to fight inflation that climbed by more than 8% in Eurozone, while the Federal Reserve is widely expected to raise rates by 75 bp at its July 26-27 policy meeting.

On top of that, the soaring U.S bond yields driven by Fed’s aggressive tightening stance have also lifted the U.S. dollar to 20-year highs against major currencies, making the dollar-denominated gold more expensive for buyers holding other currencies.

Gold is also losing safety and inflation-hedge bets as the surging interest rates are making more attractive the safe and yield-bearing greenback vs bullion such as gold and silver which pay no yield.

Gold, Daily chart

The prospects of more interest rate hikes by the Federal Reserve and European Central Bank to tackle the 40-year record-high inflation have added pressure to the rate-sensitive and non-yielding yellow metal, which retreated off yearly highs of $2,070/oz in early March (after the Russian invasion of Ukraine) to below $1,700/oz support level, down nearly 18% in just 4 months.

The European Central Bank is expected to raise rates by 25bp or 50bp for the first time in 11 years later today on Thursday to fight inflation that climbed by more than 8% in Eurozone, while the Federal Reserve is widely expected to raise rates by 75 bp at its July 26-27 policy meeting.

On top of that, the soaring U.S bond yields driven by Fed’s aggressive tightening stance have also lifted the U.S. dollar to 20-year highs against major currencies, making the dollar-denominated gold more expensive for buyers holding other currencies.

Gold is also losing safety and inflation-hedge bets as the surging interest rates are making more attractive the safe and yield-bearing greenback vs bullion such as gold and silver which pay no yield.

The price of Gold fell to as low as $1,685/oz on Thursday morning, its lowest level since early August 2021, as investors turned bearish on the yellow metal following the hawkish monetary policy stance by major central banks, the soaring dollar and bond yields at a time safety and inflation-hedged flows are directing to haven currencies instead to gold.

Gold, Daily chart

The prospects of more interest rate hikes by the Federal Reserve and European Central Bank to tackle the 40-year record-high inflation have added pressure to the rate-sensitive and non-yielding yellow metal, which retreated off yearly highs of $2,070/oz in early March (after the Russian invasion of Ukraine) to below $1,700/oz support level, down nearly 18% in just 4 months.

The European Central Bank is expected to raise rates by 25bp or 50bp for the first time in 11 years later today on Thursday to fight inflation that climbed by more than 8% in Eurozone, while the Federal Reserve is widely expected to raise rates by 75 bp at its July 26-27 policy meeting.

On top of that, the soaring U.S bond yields driven by Fed’s aggressive tightening stance have also lifted the U.S. dollar to 20-year highs against major currencies, making the dollar-denominated gold more expensive for buyers holding other currencies.

Gold is also losing safety and inflation-hedge bets as the surging interest rates are making more attractive the safe and yield-bearing greenback vs bullion such as gold and silver which pay no yield.

The price of Gold fell to as low as $1,685/oz on Thursday morning, its lowest level since early August 2021, as investors turned bearish on the yellow metal following the hawkish monetary policy stance by major central banks, the soaring dollar and bond yields at a time safety and inflation-hedged flows are directing to haven currencies instead to gold.

Gold, Daily chart

The prospects of more interest rate hikes by the Federal Reserve and European Central Bank to tackle the 40-year record-high inflation have added pressure to the rate-sensitive and non-yielding yellow metal, which retreated off yearly highs of $2,070/oz in early March (after the Russian invasion of Ukraine) to below $1,700/oz support level, down nearly 18% in just 4 months.

The European Central Bank is expected to raise rates by 25bp or 50bp for the first time in 11 years later today on Thursday to fight inflation that climbed by more than 8% in Eurozone, while the Federal Reserve is widely expected to raise rates by 75 bp at its July 26-27 policy meeting.

On top of that, the soaring U.S bond yields driven by Fed’s aggressive tightening stance have also lifted the U.S. dollar to 20-year highs against major currencies, making the dollar-denominated gold more expensive for buyers holding other currencies.

Gold is also losing safety and inflation-hedge bets as the surging interest rates are making more attractive the safe and yield-bearing greenback vs bullion such as gold and silver which pay no yield.

Euro bounces to near $1,03 on a possible ECB’s 50 bp rate hike

Posted on by Vrasidas Neofytou

The negative scenario says that the euro is likely to be pressured if Russia chooses to extend the outage of gas flows for geopolitical pressure and as a retaliation measure to the EU’s sanctions on Russian oil and gas due to the invasion of Ukraine last February.

Forex and energy traders will see if Russia will resume gas flows via the Nord Stream 1 gas pipeline to Germany and Western Europe on Thursday, after a 10-day scheduled to shut down for maintenance.

The negative scenario says that the euro is likely to be pressured if Russia chooses to extend the outage of gas flows for geopolitical pressure and as a retaliation measure to the EU’s sanctions on Russian oil and gas due to the invasion of Ukraine last February.

The dollar has retreated from last week’s multi-year highs as investors eased expectations that the Federal Reserve will hike by 100bps at July’s policy meeting, with the base case scenario expecting a 75bps hike.

Forex and energy traders will see if Russia will resume gas flows via the Nord Stream 1 gas pipeline to Germany and Western Europe on Thursday, after a 10-day scheduled to shut down for maintenance.

The negative scenario says that the euro is likely to be pressured if Russia chooses to extend the outage of gas flows for geopolitical pressure and as a retaliation measure to the EU’s sanctions on Russian oil and gas due to the invasion of Ukraine last February.

The dollar has retreated from last week’s multi-year highs as investors eased expectations that the Federal Reserve will hike by 100bps at July’s policy meeting, with the base case scenario expecting a 75bps hike.

Forex and energy traders will see if Russia will resume gas flows via the Nord Stream 1 gas pipeline to Germany and Western Europe on Thursday, after a 10-day scheduled to shut down for maintenance.

The negative scenario says that the euro is likely to be pressured if Russia chooses to extend the outage of gas flows for geopolitical pressure and as a retaliation measure to the EU’s sanctions on Russian oil and gas due to the invasion of Ukraine last February.

Euro fell briefly below the parity $1 level to a dollar on Thursday, July 14, as investors feared that the energy crisis in the continent and the lower-than-normal supplies of natural gas from Russia could hit hard its economy, sending it into an economic slowdown or even a recession, at a time U.S. dollar climbed to 20-year highs on hawkish Fed and gaining from the safe haven flows.

The dollar has retreated from last week’s multi-year highs as investors eased expectations that the Federal Reserve will hike by 100bps at July’s policy meeting, with the base case scenario expecting a 75bps hike.

Forex and energy traders will see if Russia will resume gas flows via the Nord Stream 1 gas pipeline to Germany and Western Europe on Thursday, after a 10-day scheduled to shut down for maintenance.

The negative scenario says that the euro is likely to be pressured if Russia chooses to extend the outage of gas flows for geopolitical pressure and as a retaliation measure to the EU’s sanctions on Russian oil and gas due to the invasion of Ukraine last February.

Euro fell briefly below the parity $1 level to a dollar on Thursday, July 14, as investors feared that the energy crisis in the continent and the lower-than-normal supplies of natural gas from Russia could hit hard its economy, sending it into an economic slowdown or even a recession, at a time U.S. dollar climbed to 20-year highs on hawkish Fed and gaining from the safe haven flows.

The dollar has retreated from last week’s multi-year highs as investors eased expectations that the Federal Reserve will hike by 100bps at July’s policy meeting, with the base case scenario expecting a 75bps hike.

Forex and energy traders will see if Russia will resume gas flows via the Nord Stream 1 gas pipeline to Germany and Western Europe on Thursday, after a 10-day scheduled to shut down for maintenance.

The negative scenario says that the euro is likely to be pressured if Russia chooses to extend the outage of gas flows for geopolitical pressure and as a retaliation measure to the EU’s sanctions on Russian oil and gas due to the invasion of Ukraine last February.

On the other hand, the recent weakness of the greenback supports the hard-beaten Euro. The DXY-U. S dollar index which tracks the performance of the dollar against six major peers dropped 1% to as low as 106.40 this morning, a one-week low, well below the high of 109.29 last week, a level not seen since September 2002.

Euro fell briefly below the parity $1 level to a dollar on Thursday, July 14, as investors feared that the energy crisis in the continent and the lower-than-normal supplies of natural gas from Russia could hit hard its economy, sending it into an economic slowdown or even a recession, at a time U.S. dollar climbed to 20-year highs on hawkish Fed and gaining from the safe haven flows.

The dollar has retreated from last week’s multi-year highs as investors eased expectations that the Federal Reserve will hike by 100bps at July’s policy meeting, with the base case scenario expecting a 75bps hike.

Forex and energy traders will see if Russia will resume gas flows via the Nord Stream 1 gas pipeline to Germany and Western Europe on Thursday, after a 10-day scheduled to shut down for maintenance.

The negative scenario says that the euro is likely to be pressured if Russia chooses to extend the outage of gas flows for geopolitical pressure and as a retaliation measure to the EU’s sanctions on Russian oil and gas due to the invasion of Ukraine last February.

On the other hand, the recent weakness of the greenback supports the hard-beaten Euro. The DXY-U. S dollar index which tracks the performance of the dollar against six major peers dropped 1% to as low as 106.40 this morning, a one-week low, well below the high of 109.29 last week, a level not seen since September 2002.

Euro fell briefly below the parity $1 level to a dollar on Thursday, July 14, as investors feared that the energy crisis in the continent and the lower-than-normal supplies of natural gas from Russia could hit hard its economy, sending it into an economic slowdown or even a recession, at a time U.S. dollar climbed to 20-year highs on hawkish Fed and gaining from the safe haven flows.

The dollar has retreated from last week’s multi-year highs as investors eased expectations that the Federal Reserve will hike by 100bps at July’s policy meeting, with the base case scenario expecting a 75bps hike.

Forex and energy traders will see if Russia will resume gas flows via the Nord Stream 1 gas pipeline to Germany and Western Europe on Thursday, after a 10-day scheduled to shut down for maintenance.

The negative scenario says that the euro is likely to be pressured if Russia chooses to extend the outage of gas flows for geopolitical pressure and as a retaliation measure to the EU’s sanctions on Russian oil and gas due to the invasion of Ukraine last February.

The Euro broke above the $1,02 resistance level following a Reuters report that ECB policymakers will discuss whether to hike rates by 25 or 50 points at their meeting on Thursday to curb record-high inflation, while the money markets are pricing in a 60% chance of a 50-bps hike, up from 25% on Monday.

On the other hand, the recent weakness of the greenback supports the hard-beaten Euro. The DXY-U. S dollar index which tracks the performance of the dollar against six major peers dropped 1% to as low as 106.40 this morning, a one-week low, well below the high of 109.29 last week, a level not seen since September 2002.

Euro fell briefly below the parity $1 level to a dollar on Thursday, July 14, as investors feared that the energy crisis in the continent and the lower-than-normal supplies of natural gas from Russia could hit hard its economy, sending it into an economic slowdown or even a recession, at a time U.S. dollar climbed to 20-year highs on hawkish Fed and gaining from the safe haven flows.

The dollar has retreated from last week’s multi-year highs as investors eased expectations that the Federal Reserve will hike by 100bps at July’s policy meeting, with the base case scenario expecting a 75bps hike.

Forex and energy traders will see if Russia will resume gas flows via the Nord Stream 1 gas pipeline to Germany and Western Europe on Thursday, after a 10-day scheduled to shut down for maintenance.

The negative scenario says that the euro is likely to be pressured if Russia chooses to extend the outage of gas flows for geopolitical pressure and as a retaliation measure to the EU’s sanctions on Russian oil and gas due to the invasion of Ukraine last February.

The Euro broke above the $1,02 resistance level following a Reuters report that ECB policymakers will discuss whether to hike rates by 25 or 50 points at their meeting on Thursday to curb record-high inflation, while the money markets are pricing in a 60% chance of a 50-bps hike, up from 25% on Monday.

On the other hand, the recent weakness of the greenback supports the hard-beaten Euro. The DXY-U. S dollar index which tracks the performance of the dollar against six major peers dropped 1% to as low as 106.40 this morning, a one-week low, well below the high of 109.29 last week, a level not seen since September 2002.

Euro fell briefly below the parity $1 level to a dollar on Thursday, July 14, as investors feared that the energy crisis in the continent and the lower-than-normal supplies of natural gas from Russia could hit hard its economy, sending it into an economic slowdown or even a recession, at a time U.S. dollar climbed to 20-year highs on hawkish Fed and gaining from the safe haven flows.

The dollar has retreated from last week’s multi-year highs as investors eased expectations that the Federal Reserve will hike by 100bps at July’s policy meeting, with the base case scenario expecting a 75bps hike.

Forex and energy traders will see if Russia will resume gas flows via the Nord Stream 1 gas pipeline to Germany and Western Europe on Thursday, after a 10-day scheduled to shut down for maintenance.

The negative scenario says that the euro is likely to be pressured if Russia chooses to extend the outage of gas flows for geopolitical pressure and as a retaliation measure to the EU’s sanctions on Russian oil and gas due to the invasion of Ukraine last February.

EUR/USD pair, 2-hour chart

The Euro broke above the $1,02 resistance level following a Reuters report that ECB policymakers will discuss whether to hike rates by 25 or 50 points at their meeting on Thursday to curb record-high inflation, while the money markets are pricing in a 60% chance of a 50-bps hike, up from 25% on Monday.

On the other hand, the recent weakness of the greenback supports the hard-beaten Euro. The DXY-U. S dollar index which tracks the performance of the dollar against six major peers dropped 1% to as low as 106.40 this morning, a one-week low, well below the high of 109.29 last week, a level not seen since September 2002.

Euro fell briefly below the parity $1 level to a dollar on Thursday, July 14, as investors feared that the energy crisis in the continent and the lower-than-normal supplies of natural gas from Russia could hit hard its economy, sending it into an economic slowdown or even a recession, at a time U.S. dollar climbed to 20-year highs on hawkish Fed and gaining from the safe haven flows.

The dollar has retreated from last week’s multi-year highs as investors eased expectations that the Federal Reserve will hike by 100bps at July’s policy meeting, with the base case scenario expecting a 75bps hike.

Forex and energy traders will see if Russia will resume gas flows via the Nord Stream 1 gas pipeline to Germany and Western Europe on Thursday, after a 10-day scheduled to shut down for maintenance.

The negative scenario says that the euro is likely to be pressured if Russia chooses to extend the outage of gas flows for geopolitical pressure and as a retaliation measure to the EU’s sanctions on Russian oil and gas due to the invasion of Ukraine last February.

EUR/USD pair, 2-hour chart

The Euro broke above the $1,02 resistance level following a Reuters report that ECB policymakers will discuss whether to hike rates by 25 or 50 points at their meeting on Thursday to curb record-high inflation, while the money markets are pricing in a 60% chance of a 50-bps hike, up from 25% on Monday.

On the other hand, the recent weakness of the greenback supports the hard-beaten Euro. The DXY-U. S dollar index which tracks the performance of the dollar against six major peers dropped 1% to as low as 106.40 this morning, a one-week low, well below the high of 109.29 last week, a level not seen since September 2002.

Euro fell briefly below the parity $1 level to a dollar on Thursday, July 14, as investors feared that the energy crisis in the continent and the lower-than-normal supplies of natural gas from Russia could hit hard its economy, sending it into an economic slowdown or even a recession, at a time U.S. dollar climbed to 20-year highs on hawkish Fed and gaining from the safe haven flows.

The dollar has retreated from last week’s multi-year highs as investors eased expectations that the Federal Reserve will hike by 100bps at July’s policy meeting, with the base case scenario expecting a 75bps hike.

Forex and energy traders will see if Russia will resume gas flows via the Nord Stream 1 gas pipeline to Germany and Western Europe on Thursday, after a 10-day scheduled to shut down for maintenance.

The negative scenario says that the euro is likely to be pressured if Russia chooses to extend the outage of gas flows for geopolitical pressure and as a retaliation measure to the EU’s sanctions on Russian oil and gas due to the invasion of Ukraine last February.

EUR/USD pair, 2-hour chart

The Euro broke above the $1,02 resistance level following a Reuters report that ECB policymakers will discuss whether to hike rates by 25 or 50 points at their meeting on Thursday to curb record-high inflation, while the money markets are pricing in a 60% chance of a 50-bps hike, up from 25% on Monday.

On the other hand, the recent weakness of the greenback supports the hard-beaten Euro. The DXY-U. S dollar index which tracks the performance of the dollar against six major peers dropped 1% to as low as 106.40 this morning, a one-week low, well below the high of 109.29 last week, a level not seen since September 2002.

Euro fell briefly below the parity $1 level to a dollar on Thursday, July 14, as investors feared that the energy crisis in the continent and the lower-than-normal supplies of natural gas from Russia could hit hard its economy, sending it into an economic slowdown or even a recession, at a time U.S. dollar climbed to 20-year highs on hawkish Fed and gaining from the safe haven flows.

The dollar has retreated from last week’s multi-year highs as investors eased expectations that the Federal Reserve will hike by 100bps at July’s policy meeting, with the base case scenario expecting a 75bps hike.

Forex and energy traders will see if Russia will resume gas flows via the Nord Stream 1 gas pipeline to Germany and Western Europe on Thursday, after a 10-day scheduled to shut down for maintenance.

The negative scenario says that the euro is likely to be pressured if Russia chooses to extend the outage of gas flows for geopolitical pressure and as a retaliation measure to the EU’s sanctions on Russian oil and gas due to the invasion of Ukraine last February.

The common currency bounces off parity levels towards the $1,03 level to a dollar on Tuesday afternoon getting support from reports that the European Central Bank will look at raining its official interest rates by 50bps instead of the expected 25 bps at Thursday’s meeting at a time greenback retreating from recent multi-year highs.

EUR/USD pair, 2-hour chart

The Euro broke above the $1,02 resistance level following a Reuters report that ECB policymakers will discuss whether to hike rates by 25 or 50 points at their meeting on Thursday to curb record-high inflation, while the money markets are pricing in a 60% chance of a 50-bps hike, up from 25% on Monday.

On the other hand, the recent weakness of the greenback supports the hard-beaten Euro. The DXY-U. S dollar index which tracks the performance of the dollar against six major peers dropped 1% to as low as 106.40 this morning, a one-week low, well below the high of 109.29 last week, a level not seen since September 2002.

Euro fell briefly below the parity $1 level to a dollar on Thursday, July 14, as investors feared that the energy crisis in the continent and the lower-than-normal supplies of natural gas from Russia could hit hard its economy, sending it into an economic slowdown or even a recession, at a time U.S. dollar climbed to 20-year highs on hawkish Fed and gaining from the safe haven flows.

The dollar has retreated from last week’s multi-year highs as investors eased expectations that the Federal Reserve will hike by 100bps at July’s policy meeting, with the base case scenario expecting a 75bps hike.

Forex and energy traders will see if Russia will resume gas flows via the Nord Stream 1 gas pipeline to Germany and Western Europe on Thursday, after a 10-day scheduled to shut down for maintenance.

The negative scenario says that the euro is likely to be pressured if Russia chooses to extend the outage of gas flows for geopolitical pressure and as a retaliation measure to the EU’s sanctions on Russian oil and gas due to the invasion of Ukraine last February.

The common currency bounces off parity levels towards the $1,03 level to a dollar on Tuesday afternoon getting support from reports that the European Central Bank will look at raining its official interest rates by 50bps instead of the expected 25 bps at Thursday’s meeting at a time greenback retreating from recent multi-year highs.

EUR/USD pair, 2-hour chart

The Euro broke above the $1,02 resistance level following a Reuters report that ECB policymakers will discuss whether to hike rates by 25 or 50 points at their meeting on Thursday to curb record-high inflation, while the money markets are pricing in a 60% chance of a 50-bps hike, up from 25% on Monday.

On the other hand, the recent weakness of the greenback supports the hard-beaten Euro. The DXY-U. S dollar index which tracks the performance of the dollar against six major peers dropped 1% to as low as 106.40 this morning, a one-week low, well below the high of 109.29 last week, a level not seen since September 2002.

Euro fell briefly below the parity $1 level to a dollar on Thursday, July 14, as investors feared that the energy crisis in the continent and the lower-than-normal supplies of natural gas from Russia could hit hard its economy, sending it into an economic slowdown or even a recession, at a time U.S. dollar climbed to 20-year highs on hawkish Fed and gaining from the safe haven flows.

The dollar has retreated from last week’s multi-year highs as investors eased expectations that the Federal Reserve will hike by 100bps at July’s policy meeting, with the base case scenario expecting a 75bps hike.

Forex and energy traders will see if Russia will resume gas flows via the Nord Stream 1 gas pipeline to Germany and Western Europe on Thursday, after a 10-day scheduled to shut down for maintenance.

The negative scenario says that the euro is likely to be pressured if Russia chooses to extend the outage of gas flows for geopolitical pressure and as a retaliation measure to the EU’s sanctions on Russian oil and gas due to the invasion of Ukraine last February.

The common currency bounces off parity levels towards the $1,03 level to a dollar on Tuesday afternoon getting support from reports that the European Central Bank will look at raining its official interest rates by 50bps instead of the expected 25 bps at Thursday’s meeting at a time greenback retreating from recent multi-year highs.

EUR/USD pair, 2-hour chart

The Euro broke above the $1,02 resistance level following a Reuters report that ECB policymakers will discuss whether to hike rates by 25 or 50 points at their meeting on Thursday to curb record-high inflation, while the money markets are pricing in a 60% chance of a 50-bps hike, up from 25% on Monday.

On the other hand, the recent weakness of the greenback supports the hard-beaten Euro. The DXY-U. S dollar index which tracks the performance of the dollar against six major peers dropped 1% to as low as 106.40 this morning, a one-week low, well below the high of 109.29 last week, a level not seen since September 2002.

Euro fell briefly below the parity $1 level to a dollar on Thursday, July 14, as investors feared that the energy crisis in the continent and the lower-than-normal supplies of natural gas from Russia could hit hard its economy, sending it into an economic slowdown or even a recession, at a time U.S. dollar climbed to 20-year highs on hawkish Fed and gaining from the safe haven flows.

The dollar has retreated from last week’s multi-year highs as investors eased expectations that the Federal Reserve will hike by 100bps at July’s policy meeting, with the base case scenario expecting a 75bps hike.

Forex and energy traders will see if Russia will resume gas flows via the Nord Stream 1 gas pipeline to Germany and Western Europe on Thursday, after a 10-day scheduled to shut down for maintenance.

The negative scenario says that the euro is likely to be pressured if Russia chooses to extend the outage of gas flows for geopolitical pressure and as a retaliation measure to the EU’s sanctions on Russian oil and gas due to the invasion of Ukraine last February.

No relief for equities yet

Posted on by George Kessarios

So, the Fed is slowly getting what it wants, although continued high energy prices are preventing it from declaring victory.

The question now is what will the Fed do next? Many financial commentators noted the Fed needs to raise rates by 100 basis points in its next meeting, as opposed to the guidance of 75. My take is that will only add more uncertainty to market participants and asset prices, particularly to equity prices. As such, while equities have retreated for some time now, and higher rates are already priced in the market (hopefully), if the Fed does become more aggressive than it already is, all bets are off and market participants will have to think about their strategy once again.

At the same time the Beige Book was also published on the same day. The report was mixed, with many districts reporting a slowdown in demand, and districts also noted an increased risk of a recession. Housing demand has decreased notably because of affordability concerns, but supply chain problems continue to exist. And the report ends noting:

“the outlook for future economic growth was mostly negative among reporting Districts, with contacts noting expectations for further weakening of demand over the next six to twelve months.”

So, the Fed is slowly getting what it wants, although continued high energy prices are preventing it from declaring victory.

The question now is what will the Fed do next? Many financial commentators noted the Fed needs to raise rates by 100 basis points in its next meeting, as opposed to the guidance of 75. My take is that will only add more uncertainty to market participants and asset prices, particularly to equity prices. As such, while equities have retreated for some time now, and higher rates are already priced in the market (hopefully), if the Fed does become more aggressive than it already is, all bets are off and market participants will have to think about their strategy once again.

The problem with the latest BLS report is that there are many components which the Fed does not control, energy being the most obvious. So, while we are seeing deflation in many CPI components, the inflationary parts outweigh. The trick for the Fed is how to cause more deflation in parts that it controls, to overtake the parts it does not control. Housing is of particular importance, because interest rates have a direct impact on housing, and the transmission of policy is faster and with surgical accuracy.

At the same time the Beige Book was also published on the same day. The report was mixed, with many districts reporting a slowdown in demand, and districts also noted an increased risk of a recession. Housing demand has decreased notably because of affordability concerns, but supply chain problems continue to exist. And the report ends noting:

“the outlook for future economic growth was mostly negative among reporting Districts, with contacts noting expectations for further weakening of demand over the next six to twelve months.”

So, the Fed is slowly getting what it wants, although continued high energy prices are preventing it from declaring victory.

The question now is what will the Fed do next? Many financial commentators noted the Fed needs to raise rates by 100 basis points in its next meeting, as opposed to the guidance of 75. My take is that will only add more uncertainty to market participants and asset prices, particularly to equity prices. As such, while equities have retreated for some time now, and higher rates are already priced in the market (hopefully), if the Fed does become more aggressive than it already is, all bets are off and market participants will have to think about their strategy once again.

In fact, energy overall was up 41.6%, with fuel oil leading the energy pack of 98.5%.

The problem with the latest BLS report is that there are many components which the Fed does not control, energy being the most obvious. So, while we are seeing deflation in many CPI components, the inflationary parts outweigh. The trick for the Fed is how to cause more deflation in parts that it controls, to overtake the parts it does not control. Housing is of particular importance, because interest rates have a direct impact on housing, and the transmission of policy is faster and with surgical accuracy.

At the same time the Beige Book was also published on the same day. The report was mixed, with many districts reporting a slowdown in demand, and districts also noted an increased risk of a recession. Housing demand has decreased notably because of affordability concerns, but supply chain problems continue to exist. And the report ends noting:

“the outlook for future economic growth was mostly negative among reporting Districts, with contacts noting expectations for further weakening of demand over the next six to twelve months.”

So, the Fed is slowly getting what it wants, although continued high energy prices are preventing it from declaring victory.

The question now is what will the Fed do next? Many financial commentators noted the Fed needs to raise rates by 100 basis points in its next meeting, as opposed to the guidance of 75. My take is that will only add more uncertainty to market participants and asset prices, particularly to equity prices. As such, while equities have retreated for some time now, and higher rates are already priced in the market (hopefully), if the Fed does become more aggressive than it already is, all bets are off and market participants will have to think about their strategy once again.

In fact, energy overall was up 41.6%, with fuel oil leading the energy pack of 98.5%.

The problem with the latest BLS report is that there are many components which the Fed does not control, energy being the most obvious. So, while we are seeing deflation in many CPI components, the inflationary parts outweigh. The trick for the Fed is how to cause more deflation in parts that it controls, to overtake the parts it does not control. Housing is of particular importance, because interest rates have a direct impact on housing, and the transmission of policy is faster and with surgical accuracy.

At the same time the Beige Book was also published on the same day. The report was mixed, with many districts reporting a slowdown in demand, and districts also noted an increased risk of a recession. Housing demand has decreased notably because of affordability concerns, but supply chain problems continue to exist. And the report ends noting:

“the outlook for future economic growth was mostly negative among reporting Districts, with contacts noting expectations for further weakening of demand over the next six to twelve months.”

So, the Fed is slowly getting what it wants, although continued high energy prices are preventing it from declaring victory.

The question now is what will the Fed do next? Many financial commentators noted the Fed needs to raise rates by 100 basis points in its next meeting, as opposed to the guidance of 75. My take is that will only add more uncertainty to market participants and asset prices, particularly to equity prices. As such, while equities have retreated for some time now, and higher rates are already priced in the market (hopefully), if the Fed does become more aggressive than it already is, all bets are off and market participants will have to think about their strategy once again.

But when take a close look at the BLS data, we find them mostly to be about energy.

In fact, energy overall was up 41.6%, with fuel oil leading the energy pack of 98.5%.

The problem with the latest BLS report is that there are many components which the Fed does not control, energy being the most obvious. So, while we are seeing deflation in many CPI components, the inflationary parts outweigh. The trick for the Fed is how to cause more deflation in parts that it controls, to overtake the parts it does not control. Housing is of particular importance, because interest rates have a direct impact on housing, and the transmission of policy is faster and with surgical accuracy.

At the same time the Beige Book was also published on the same day. The report was mixed, with many districts reporting a slowdown in demand, and districts also noted an increased risk of a recession. Housing demand has decreased notably because of affordability concerns, but supply chain problems continue to exist. And the report ends noting:

“the outlook for future economic growth was mostly negative among reporting Districts, with contacts noting expectations for further weakening of demand over the next six to twelve months.”

So, the Fed is slowly getting what it wants, although continued high energy prices are preventing it from declaring victory.

The question now is what will the Fed do next? Many financial commentators noted the Fed needs to raise rates by 100 basis points in its next meeting, as opposed to the guidance of 75. My take is that will only add more uncertainty to market participants and asset prices, particularly to equity prices. As such, while equities have retreated for some time now, and higher rates are already priced in the market (hopefully), if the Fed does become more aggressive than it already is, all bets are off and market participants will have to think about their strategy once again.

On a positive note, excluding food and energy, prices are continuing to go lower, with core inflation (what the Fed supposedly mostly looks at and acts upon) falling just under 6%.

But when take a close look at the BLS data, we find them mostly to be about energy.

In fact, energy overall was up 41.6%, with fuel oil leading the energy pack of 98.5%.

The problem with the latest BLS report is that there are many components which the Fed does not control, energy being the most obvious. So, while we are seeing deflation in many CPI components, the inflationary parts outweigh. The trick for the Fed is how to cause more deflation in parts that it controls, to overtake the parts it does not control. Housing is of particular importance, because interest rates have a direct impact on housing, and the transmission of policy is faster and with surgical accuracy.

At the same time the Beige Book was also published on the same day. The report was mixed, with many districts reporting a slowdown in demand, and districts also noted an increased risk of a recession. Housing demand has decreased notably because of affordability concerns, but supply chain problems continue to exist. And the report ends noting:

“the outlook for future economic growth was mostly negative among reporting Districts, with contacts noting expectations for further weakening of demand over the next six to twelve months.”

So, the Fed is slowly getting what it wants, although continued high energy prices are preventing it from declaring victory.

The question now is what will the Fed do next? Many financial commentators noted the Fed needs to raise rates by 100 basis points in its next meeting, as opposed to the guidance of 75. My take is that will only add more uncertainty to market participants and asset prices, particularly to equity prices. As such, while equities have retreated for some time now, and higher rates are already priced in the market (hopefully), if the Fed does become more aggressive than it already is, all bets are off and market participants will have to think about their strategy once again.

The latest CPI print for June from the BLS in the US was 9.1% on a Y/Y basis, the highest since November of 1981. Economists were expecting an increase of 8.8%. On a monthly basis, prices increased 1.3%, up from the 1% in May, which might mean price increases are accelerating. (Source BLS)

On a positive note, excluding food and energy, prices are continuing to go lower, with core inflation (what the Fed supposedly mostly looks at and acts upon) falling just under 6%.

But when take a close look at the BLS data, we find them mostly to be about energy.

In fact, energy overall was up 41.6%, with fuel oil leading the energy pack of 98.5%.

The problem with the latest BLS report is that there are many components which the Fed does not control, energy being the most obvious. So, while we are seeing deflation in many CPI components, the inflationary parts outweigh. The trick for the Fed is how to cause more deflation in parts that it controls, to overtake the parts it does not control. Housing is of particular importance, because interest rates have a direct impact on housing, and the transmission of policy is faster and with surgical accuracy.

At the same time the Beige Book was also published on the same day. The report was mixed, with many districts reporting a slowdown in demand, and districts also noted an increased risk of a recession. Housing demand has decreased notably because of affordability concerns, but supply chain problems continue to exist. And the report ends noting:

“the outlook for future economic growth was mostly negative among reporting Districts, with contacts noting expectations for further weakening of demand over the next six to twelve months.”

So, the Fed is slowly getting what it wants, although continued high energy prices are preventing it from declaring victory.

The question now is what will the Fed do next? Many financial commentators noted the Fed needs to raise rates by 100 basis points in its next meeting, as opposed to the guidance of 75. My take is that will only add more uncertainty to market participants and asset prices, particularly to equity prices. As such, while equities have retreated for some time now, and higher rates are already priced in the market (hopefully), if the Fed does become more aggressive than it already is, all bets are off and market participants will have to think about their strategy once again.

The latest CPI print for June from the BLS in the US was 9.1% on a Y/Y basis, the highest since November of 1981. Economists were expecting an increase of 8.8%. On a monthly basis, prices increased 1.3%, up from the 1% in May, which might mean price increases are accelerating. (Source BLS)

On a positive note, excluding food and energy, prices are continuing to go lower, with core inflation (what the Fed supposedly mostly looks at and acts upon) falling just under 6%.

But when take a close look at the BLS data, we find them mostly to be about energy.

In fact, energy overall was up 41.6%, with fuel oil leading the energy pack of 98.5%.

The problem with the latest BLS report is that there are many components which the Fed does not control, energy being the most obvious. So, while we are seeing deflation in many CPI components, the inflationary parts outweigh. The trick for the Fed is how to cause more deflation in parts that it controls, to overtake the parts it does not control. Housing is of particular importance, because interest rates have a direct impact on housing, and the transmission of policy is faster and with surgical accuracy.

At the same time the Beige Book was also published on the same day. The report was mixed, with many districts reporting a slowdown in demand, and districts also noted an increased risk of a recession. Housing demand has decreased notably because of affordability concerns, but supply chain problems continue to exist. And the report ends noting:

“the outlook for future economic growth was mostly negative among reporting Districts, with contacts noting expectations for further weakening of demand over the next six to twelve months.”

So, the Fed is slowly getting what it wants, although continued high energy prices are preventing it from declaring victory.

The question now is what will the Fed do next? Many financial commentators noted the Fed needs to raise rates by 100 basis points in its next meeting, as opposed to the guidance of 75. My take is that will only add more uncertainty to market participants and asset prices, particularly to equity prices. As such, while equities have retreated for some time now, and higher rates are already priced in the market (hopefully), if the Fed does become more aggressive than it already is, all bets are off and market participants will have to think about their strategy once again.

Oil bears are back pushing prices below the $100/b level

Posted on by Vrasidas Neofytou

Hence, the latest strengthening of the U.S. dollar due to the safe-haven flows, the aggressive monetary stance by Federal Reserve to curb 41-year record high inflation (9,1% in June), and the prospects for a 100bp rate hike later in the month, had played a negative role in the dollar-denominated crude oil and other commodities prices.

The DXY-dollar index which tracks the value of the greenback against six major peers reached 108.59 on Thursday, the highest since October 2002, making crude oil contracts more expensive for buyers with foreign currencies.

Energy investors have tumbled oil positions on worries that aggressive interest rate hikes from global central banks to fight soaring inflation will spur a global economic recession later this year or into 2023, which could create destruction on demand for crude oil, gasoline, diesel, and other petroleum products.

The selling pressure also accelerated this week by fears of further demand destruction after major economic hubs in China started enacting fresh covid-led social and business restrictions to control the spread of the latest Covid-19 variant in the country.

Hence, the latest strengthening of the U.S. dollar due to the safe-haven flows, the aggressive monetary stance by Federal Reserve to curb 41-year record high inflation (9,1% in June), and the prospects for a 100bp rate hike later in the month, had played a negative role in the dollar-denominated crude oil and other commodities prices.

The DXY-dollar index which tracks the value of the greenback against six major peers reached 108.59 on Thursday, the highest since October 2002, making crude oil contracts more expensive for buyers with foreign currencies.

Both oil prices have fallen to the lowest level since early March when Western allies imposed strict sanctions on Russian oil and gas sales, and at some point, they entered a bear market territory since they have lost more than 20% of their value from March’s multi-year highs of $140/b and $130/b respectively.

Energy investors have tumbled oil positions on worries that aggressive interest rate hikes from global central banks to fight soaring inflation will spur a global economic recession later this year or into 2023, which could create destruction on demand for crude oil, gasoline, diesel, and other petroleum products.

The selling pressure also accelerated this week by fears of further demand destruction after major economic hubs in China started enacting fresh covid-led social and business restrictions to control the spread of the latest Covid-19 variant in the country.

Hence, the latest strengthening of the U.S. dollar due to the safe-haven flows, the aggressive monetary stance by Federal Reserve to curb 41-year record high inflation (9,1% in June), and the prospects for a 100bp rate hike later in the month, had played a negative role in the dollar-denominated crude oil and other commodities prices.

The DXY-dollar index which tracks the value of the greenback against six major peers reached 108.59 on Thursday, the highest since October 2002, making crude oil contracts more expensive for buyers with foreign currencies.

Brent crude fell to as low as $94/b in Thursday’s intraday session, before settling at near $99/b, while WTI was changing hands at $90/b at one point before bouncing to $96/b at the end of the day, marking the fourth consecutive day of declines.

Both oil prices have fallen to the lowest level since early March when Western allies imposed strict sanctions on Russian oil and gas sales, and at some point, they entered a bear market territory since they have lost more than 20% of their value from March’s multi-year highs of $140/b and $130/b respectively.

Energy investors have tumbled oil positions on worries that aggressive interest rate hikes from global central banks to fight soaring inflation will spur a global economic recession later this year or into 2023, which could create destruction on demand for crude oil, gasoline, diesel, and other petroleum products.

The selling pressure also accelerated this week by fears of further demand destruction after major economic hubs in China started enacting fresh covid-led social and business restrictions to control the spread of the latest Covid-19 variant in the country.

Hence, the latest strengthening of the U.S. dollar due to the safe-haven flows, the aggressive monetary stance by Federal Reserve to curb 41-year record high inflation (9,1% in June), and the prospects for a 100bp rate hike later in the month, had played a negative role in the dollar-denominated crude oil and other commodities prices.

The DXY-dollar index which tracks the value of the greenback against six major peers reached 108.59 on Thursday, the highest since October 2002, making crude oil contracts more expensive for buyers with foreign currencies.

WTI crude oil, 2-hours chart

Brent crude fell to as low as $94/b in Thursday’s intraday session, before settling at near $99/b, while WTI was changing hands at $90/b at one point before bouncing to $96/b at the end of the day, marking the fourth consecutive day of declines.

Both oil prices have fallen to the lowest level since early March when Western allies imposed strict sanctions on Russian oil and gas sales, and at some point, they entered a bear market territory since they have lost more than 20% of their value from March’s multi-year highs of $140/b and $130/b respectively.

Energy investors have tumbled oil positions on worries that aggressive interest rate hikes from global central banks to fight soaring inflation will spur a global economic recession later this year or into 2023, which could create destruction on demand for crude oil, gasoline, diesel, and other petroleum products.

The selling pressure also accelerated this week by fears of further demand destruction after major economic hubs in China started enacting fresh covid-led social and business restrictions to control the spread of the latest Covid-19 variant in the country.

Hence, the latest strengthening of the U.S. dollar due to the safe-haven flows, the aggressive monetary stance by Federal Reserve to curb 41-year record high inflation (9,1% in June), and the prospects for a 100bp rate hike later in the month, had played a negative role in the dollar-denominated crude oil and other commodities prices.

The DXY-dollar index which tracks the value of the greenback against six major peers reached 108.59 on Thursday, the highest since October 2002, making crude oil contracts more expensive for buyers with foreign currencies.

WTI crude oil, 2-hours chart

Brent crude fell to as low as $94/b in Thursday’s intraday session, before settling at near $99/b, while WTI was changing hands at $90/b at one point before bouncing to $96/b at the end of the day, marking the fourth consecutive day of declines.

Both oil prices have fallen to the lowest level since early March when Western allies imposed strict sanctions on Russian oil and gas sales, and at some point, they entered a bear market territory since they have lost more than 20% of their value from March’s multi-year highs of $140/b and $130/b respectively.

Energy investors have tumbled oil positions on worries that aggressive interest rate hikes from global central banks to fight soaring inflation will spur a global economic recession later this year or into 2023, which could create destruction on demand for crude oil, gasoline, diesel, and other petroleum products.

The selling pressure also accelerated this week by fears of further demand destruction after major economic hubs in China started enacting fresh covid-led social and business restrictions to control the spread of the latest Covid-19 variant in the country.

Hence, the latest strengthening of the U.S. dollar due to the safe-haven flows, the aggressive monetary stance by Federal Reserve to curb 41-year record high inflation (9,1% in June), and the prospects for a 100bp rate hike later in the month, had played a negative role in the dollar-denominated crude oil and other commodities prices.

The DXY-dollar index which tracks the value of the greenback against six major peers reached 108.59 on Thursday, the highest since October 2002, making crude oil contracts more expensive for buyers with foreign currencies.

The oil bears have taken the upper hand in oil markets lately as both the Brent and WTI oil prices have tumbled below the $100/b key psychological level for the first time since March amid the growing worries that a global economic recession could and the ongoing Covid-led lockdowns in China could dampen demand for petroleum products despite the fear for tight supplies, the underinvestment conditions, and the embargo of Russian oil.

WTI crude oil, 2-hours chart

Brent crude fell to as low as $94/b in Thursday’s intraday session, before settling at near $99/b, while WTI was changing hands at $90/b at one point before bouncing to $96/b at the end of the day, marking the fourth consecutive day of declines.

Both oil prices have fallen to the lowest level since early March when Western allies imposed strict sanctions on Russian oil and gas sales, and at some point, they entered a bear market territory since they have lost more than 20% of their value from March’s multi-year highs of $140/b and $130/b respectively.

Energy investors have tumbled oil positions on worries that aggressive interest rate hikes from global central banks to fight soaring inflation will spur a global economic recession later this year or into 2023, which could create destruction on demand for crude oil, gasoline, diesel, and other petroleum products.

The selling pressure also accelerated this week by fears of further demand destruction after major economic hubs in China started enacting fresh covid-led social and business restrictions to control the spread of the latest Covid-19 variant in the country.

Hence, the latest strengthening of the U.S. dollar due to the safe-haven flows, the aggressive monetary stance by Federal Reserve to curb 41-year record high inflation (9,1% in June), and the prospects for a 100bp rate hike later in the month, had played a negative role in the dollar-denominated crude oil and other commodities prices.

The DXY-dollar index which tracks the value of the greenback against six major peers reached 108.59 on Thursday, the highest since October 2002, making crude oil contracts more expensive for buyers with foreign currencies.

The oil bears have taken the upper hand in oil markets lately as both the Brent and WTI oil prices have tumbled below the $100/b key psychological level for the first time since March amid the growing worries that a global economic recession could and the ongoing Covid-led lockdowns in China could dampen demand for petroleum products despite the fear for tight supplies, the underinvestment conditions, and the embargo of Russian oil.

WTI crude oil, 2-hours chart

Brent crude fell to as low as $94/b in Thursday’s intraday session, before settling at near $99/b, while WTI was changing hands at $90/b at one point before bouncing to $96/b at the end of the day, marking the fourth consecutive day of declines.

Both oil prices have fallen to the lowest level since early March when Western allies imposed strict sanctions on Russian oil and gas sales, and at some point, they entered a bear market territory since they have lost more than 20% of their value from March’s multi-year highs of $140/b and $130/b respectively.

Energy investors have tumbled oil positions on worries that aggressive interest rate hikes from global central banks to fight soaring inflation will spur a global economic recession later this year or into 2023, which could create destruction on demand for crude oil, gasoline, diesel, and other petroleum products.

The selling pressure also accelerated this week by fears of further demand destruction after major economic hubs in China started enacting fresh covid-led social and business restrictions to control the spread of the latest Covid-19 variant in the country.

Hence, the latest strengthening of the U.S. dollar due to the safe-haven flows, the aggressive monetary stance by Federal Reserve to curb 41-year record high inflation (9,1% in June), and the prospects for a 100bp rate hike later in the month, had played a negative role in the dollar-denominated crude oil and other commodities prices.

The DXY-dollar index which tracks the value of the greenback against six major peers reached 108.59 on Thursday, the highest since October 2002, making crude oil contracts more expensive for buyers with foreign currencies.

Euro edges ever closer to U.S. dollar parity

Posted on by Vrasidas Neofytou

Forex traders are worried the shutdown of the Nord Stream 1 might be extended because of the war in Ukraine and as a retaliation measure from Russia to Europe amid its sanctions, restricting European gas supply further and tipping the struggling eurozone economy into recession.

The EUR/USD pair could face increasing selling pressure if it breaks below the $1 psychological level, triggering stop loss trades, and attacking forex traders that follow the market momentum with a short-term horizontal view.

The Euro already fell beneath parity on the Swiss franc last month, currently trading near the 0,98 level, and is flirting with a drop beneath the 0,84 mark against the Sterling pound, despite the recent weakness after the resignation of British Prime Minister Boris Johnson last week.

The recent strength of the greenback has been also pressuring the growth-sensitive Euro, with the DXY-dollar index, which tracks the dollar against a basket of six peers rising to as high as 108.50 on Tuesday, the highest since October 2002.

Investors were rushing to the dollar for its safety characteristics at times of market volatility, the growing fears for a global recession, and the hawkish Fed which had tightened its monetary policy to curb the 40-year high inflation.

EUR/USD pair, 1-hour chart

The bearish pressure on the Euro increased at the beginning of the week after the biggest single pipeline (Nord Stream 1) carrying Russian natural gas to Germany via the Baltic Sea entered annual maintenance on Monday, with flows expected to stop for 10 days.

Forex traders are worried the shutdown of the Nord Stream 1 might be extended because of the war in Ukraine and as a retaliation measure from Russia to Europe amid its sanctions, restricting European gas supply further and tipping the struggling eurozone economy into recession.

The EUR/USD pair could face increasing selling pressure if it breaks below the $1 psychological level, triggering stop loss trades, and attacking forex traders that follow the market momentum with a short-term horizontal view.

The Euro already fell beneath parity on the Swiss franc last month, currently trading near the 0,98 level, and is flirting with a drop beneath the 0,84 mark against the Sterling pound, despite the recent weakness after the resignation of British Prime Minister Boris Johnson last week.

The recent strength of the greenback has been also pressuring the growth-sensitive Euro, with the DXY-dollar index, which tracks the dollar against a basket of six peers rising to as high as 108.50 on Tuesday, the highest since October 2002.

Investors were rushing to the dollar for its safety characteristics at times of market volatility, the growing fears for a global recession, and the hawkish Fed which had tightened its monetary policy to curb the 40-year high inflation.

EUR/USD pair, 1-hour chart

The bearish pressure on the Euro increased at the beginning of the week after the biggest single pipeline (Nord Stream 1) carrying Russian natural gas to Germany via the Baltic Sea entered annual maintenance on Monday, with flows expected to stop for 10 days.

Forex traders are worried the shutdown of the Nord Stream 1 might be extended because of the war in Ukraine and as a retaliation measure from Russia to Europe amid its sanctions, restricting European gas supply further and tipping the struggling eurozone economy into recession.

The EUR/USD pair could face increasing selling pressure if it breaks below the $1 psychological level, triggering stop loss trades, and attacking forex traders that follow the market momentum with a short-term horizontal view.

The Euro already fell beneath parity on the Swiss franc last month, currently trading near the 0,98 level, and is flirting with a drop beneath the 0,84 mark against the Sterling pound, despite the recent weakness after the resignation of British Prime Minister Boris Johnson last week.

The recent strength of the greenback has been also pressuring the growth-sensitive Euro, with the DXY-dollar index, which tracks the dollar against a basket of six peers rising to as high as 108.50 on Tuesday, the highest since October 2002.

Investors were rushing to the dollar for its safety characteristics at times of market volatility, the growing fears for a global recession, and the hawkish Fed which had tightened its monetary policy to curb the 40-year high inflation.

The Euro fell as low as $1,0005 against the U.S. dollar on Tuesday morning, edging lower toward parity for the first time since December 2002, following the negative sentiment for the common currency as the war in Ukraine has triggered an energy crisis that has deteriorated the Eurozone’s economic growth outlook.

The common currency has lost nearly 12% this year so far, with economists worrying that the energy crisis, the soaring inflation, and the supply chain disruptions will tip the Eurozone into a recession in late 2022 or early 2023.

EUR/USD pair, 1-hour chart

The bearish pressure on the Euro increased at the beginning of the week after the biggest single pipeline (Nord Stream 1) carrying Russian natural gas to Germany via the Baltic Sea entered annual maintenance on Monday, with flows expected to stop for 10 days.

Forex traders are worried the shutdown of the Nord Stream 1 might be extended because of the war in Ukraine and as a retaliation measure from Russia to Europe amid its sanctions, restricting European gas supply further and tipping the struggling eurozone economy into recession.

The EUR/USD pair could face increasing selling pressure if it breaks below the $1 psychological level, triggering stop loss trades, and attacking forex traders that follow the market momentum with a short-term horizontal view.

The Euro already fell beneath parity on the Swiss franc last month, currently trading near the 0,98 level, and is flirting with a drop beneath the 0,84 mark against the Sterling pound, despite the recent weakness after the resignation of British Prime Minister Boris Johnson last week.

The recent strength of the greenback has been also pressuring the growth-sensitive Euro, with the DXY-dollar index, which tracks the dollar against a basket of six peers rising to as high as 108.50 on Tuesday, the highest since October 2002.

Investors were rushing to the dollar for its safety characteristics at times of market volatility, the growing fears for a global recession, and the hawkish Fed which had tightened its monetary policy to curb the 40-year high inflation.

The Euro fell as low as $1,0005 against the U.S. dollar on Tuesday morning, edging lower toward parity for the first time since December 2002, following the negative sentiment for the common currency as the war in Ukraine has triggered an energy crisis that has deteriorated the Eurozone’s economic growth outlook.

The common currency has lost nearly 12% this year so far, with economists worrying that the energy crisis, the soaring inflation, and the supply chain disruptions will tip the Eurozone into a recession in late 2022 or early 2023.

EUR/USD pair, 1-hour chart

The bearish pressure on the Euro increased at the beginning of the week after the biggest single pipeline (Nord Stream 1) carrying Russian natural gas to Germany via the Baltic Sea entered annual maintenance on Monday, with flows expected to stop for 10 days.

Forex traders are worried the shutdown of the Nord Stream 1 might be extended because of the war in Ukraine and as a retaliation measure from Russia to Europe amid its sanctions, restricting European gas supply further and tipping the struggling eurozone economy into recession.

The EUR/USD pair could face increasing selling pressure if it breaks below the $1 psychological level, triggering stop loss trades, and attacking forex traders that follow the market momentum with a short-term horizontal view.

The Euro already fell beneath parity on the Swiss franc last month, currently trading near the 0,98 level, and is flirting with a drop beneath the 0,84 mark against the Sterling pound, despite the recent weakness after the resignation of British Prime Minister Boris Johnson last week.

The recent strength of the greenback has been also pressuring the growth-sensitive Euro, with the DXY-dollar index, which tracks the dollar against a basket of six peers rising to as high as 108.50 on Tuesday, the highest since October 2002.

Investors were rushing to the dollar for its safety characteristics at times of market volatility, the growing fears for a global recession, and the hawkish Fed which had tightened its monetary policy to curb the 40-year high inflation.

The Euro fell as low as $1,0005 against the U.S. dollar on Tuesday morning, edging lower toward parity for the first time since December 2002, following the negative sentiment for the common currency as the war in Ukraine has triggered an energy crisis that has deteriorated the Eurozone’s economic growth outlook.

The common currency has lost nearly 12% this year so far, with economists worrying that the energy crisis, the soaring inflation, and the supply chain disruptions will tip the Eurozone into a recession in late 2022 or early 2023.

EUR/USD pair, 1-hour chart

The bearish pressure on the Euro increased at the beginning of the week after the biggest single pipeline (Nord Stream 1) carrying Russian natural gas to Germany via the Baltic Sea entered annual maintenance on Monday, with flows expected to stop for 10 days.

Forex traders are worried the shutdown of the Nord Stream 1 might be extended because of the war in Ukraine and as a retaliation measure from Russia to Europe amid its sanctions, restricting European gas supply further and tipping the struggling eurozone economy into recession.

The EUR/USD pair could face increasing selling pressure if it breaks below the $1 psychological level, triggering stop loss trades, and attacking forex traders that follow the market momentum with a short-term horizontal view.

The Euro already fell beneath parity on the Swiss franc last month, currently trading near the 0,98 level, and is flirting with a drop beneath the 0,84 mark against the Sterling pound, despite the recent weakness after the resignation of British Prime Minister Boris Johnson last week.

The recent strength of the greenback has been also pressuring the growth-sensitive Euro, with the DXY-dollar index, which tracks the dollar against a basket of six peers rising to as high as 108.50 on Tuesday, the highest since October 2002.

Investors were rushing to the dollar for its safety characteristics at times of market volatility, the growing fears for a global recession, and the hawkish Fed which had tightened its monetary policy to curb the 40-year high inflation.

Intermarket relations work until they don’t

Posted on by George Kessarios

And while commodities have been elevated this year, it was not because of inflation, but because of a war coupled with supply disturbances relating to the Covid Pandemic.

Gold, which we were told over the past 40 years is an inflation hedge and a safe haven, is not acting as such. In fact, if gold can’t get a bid with the highest inflation data in 40 years, a war, and major supply disturbances, when will it get a bid and rally?

For some reason this time around, intermarket relationships are not going according to plan. Does that mean gold will never rally to $10,000 an ounce as many forecast? I have no idea. Perhaps it will someday, under circumstances that we cannot foresee today.

And in all fairness to intermarket strategists, I think one reason why things are different this time is the very strong dollar. While gold has not rallied in dollars, it is up in most other currencies.

The bottom line is that intermarket relations this time around are acting different than what we have been accustomed to. Whether these relations return to what we have been conditioned to, in the future, is unknown. But what is important to understand is that intermarket relations are a function of market forces and circumstances and are not written in stone. Like history, intermarket relations rhyme during market cycles, but are never the same. Most important of all, Intermarket relations work until they don’t.

For the past 40 years we have been conditioned about many different intermarket relations.

For example, we have been told inflation means higher commodity prices. Also, high inflation means higher gold prices, because we have been conditioned that gold is the ultimate inflation hedge.

And while commodities have been elevated this year, it was not because of inflation, but because of a war coupled with supply disturbances relating to the Covid Pandemic.

Gold, which we were told over the past 40 years is an inflation hedge and a safe haven, is not acting as such. In fact, if gold can’t get a bid with the highest inflation data in 40 years, a war, and major supply disturbances, when will it get a bid and rally?

For some reason this time around, intermarket relationships are not going according to plan. Does that mean gold will never rally to $10,000 an ounce as many forecast? I have no idea. Perhaps it will someday, under circumstances that we cannot foresee today.

And in all fairness to intermarket strategists, I think one reason why things are different this time is the very strong dollar. While gold has not rallied in dollars, it is up in most other currencies.

The bottom line is that intermarket relations this time around are acting different than what we have been accustomed to. Whether these relations return to what we have been conditioned to, in the future, is unknown. But what is important to understand is that intermarket relations are a function of market forces and circumstances and are not written in stone. Like history, intermarket relations rhyme during market cycles, but are never the same. Most important of all, Intermarket relations work until they don’t.

For the past 40 years we have been conditioned about many different intermarket relations.

For example, we have been told inflation means higher commodity prices. Also, high inflation means higher gold prices, because we have been conditioned that gold is the ultimate inflation hedge.

And while commodities have been elevated this year, it was not because of inflation, but because of a war coupled with supply disturbances relating to the Covid Pandemic.

Gold, which we were told over the past 40 years is an inflation hedge and a safe haven, is not acting as such. In fact, if gold can’t get a bid with the highest inflation data in 40 years, a war, and major supply disturbances, when will it get a bid and rally?

For some reason this time around, intermarket relationships are not going according to plan. Does that mean gold will never rally to $10,000 an ounce as many forecast? I have no idea. Perhaps it will someday, under circumstances that we cannot foresee today.

And in all fairness to intermarket strategists, I think one reason why things are different this time is the very strong dollar. While gold has not rallied in dollars, it is up in most other currencies.

The bottom line is that intermarket relations this time around are acting different than what we have been accustomed to. Whether these relations return to what we have been conditioned to, in the future, is unknown. But what is important to understand is that intermarket relations are a function of market forces and circumstances and are not written in stone. Like history, intermarket relations rhyme during market cycles, but are never the same. Most important of all, Intermarket relations work until they don’t.

For the past 40 years we have been conditioned about many different intermarket relations.

For example, we have been told inflation means higher commodity prices. Also, high inflation means higher gold prices, because we have been conditioned that gold is the ultimate inflation hedge.

And while commodities have been elevated this year, it was not because of inflation, but because of a war coupled with supply disturbances relating to the Covid Pandemic.

Gold, which we were told over the past 40 years is an inflation hedge and a safe haven, is not acting as such. In fact, if gold can’t get a bid with the highest inflation data in 40 years, a war, and major supply disturbances, when will it get a bid and rally?

For some reason this time around, intermarket relationships are not going according to plan. Does that mean gold will never rally to $10,000 an ounce as many forecast? I have no idea. Perhaps it will someday, under circumstances that we cannot foresee today.

And in all fairness to intermarket strategists, I think one reason why things are different this time is the very strong dollar. While gold has not rallied in dollars, it is up in most other currencies.

The bottom line is that intermarket relations this time around are acting different than what we have been accustomed to. Whether these relations return to what we have been conditioned to, in the future, is unknown. But what is important to understand is that intermarket relations are a function of market forces and circumstances and are not written in stone. Like history, intermarket relations rhyme during market cycles, but are never the same. Most important of all, Intermarket relations work until they don’t.

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