Dollar dip, U.S.-China tensions push gold to a new 1-month peak

“It always seems impossible until it’s done.” — Nelson Mandela

 

 

HEADLINES

 

 

• Sterling slammed as BoE delivers big rate hike but warns of long recession
• Dollar dip, U.S.-China tensions push gold to a new 1-month peak
• Oil prices slump to lowest since before Ukraine invasion as recession fears weigh
• Wall Street slides with bond yields as recession worries flare
• 10-year yield slides below 2.70% as jobless claims increase
• EUR/GBP likely to move higher in the near-term, three-month target at 0.86 – Danske Bank
• EURUSD Short Term: Upside favored

 

 

Sterling slammed as BoE delivers big rate hike but warns of long recession

 

 

Sterling fell on Thursday after the Bank of England raised interest rates by the most in 27 years as it seeks to tame inflation now seen peaking at more than 13% but also warned that a long recession is on its way.

The pound fell 0.35% to $1.2105 , having traded 0.3% higher at $1.2184 just before the BoE decision was announced.

The BoE warned that Britain was facing a recession as it rose its benchmark rate by 50 basis points (bps) to 1.75% in an attempt to curb inflation.

 

 

COMMODITIES

 

 

Dollar dip, U.S.-China tensions push gold to a new 1-month peak

 

 

Gold prices climbed over 1% to hit a fresh one-month peak on Thursday underpinned by a retreat in the dollar and U.S. Treasury yields, and as investors kept a close tab on U.S.-China tensions.

Spot gold was up 1.1% to $1,784.70 per ounce at 10:47 a.m. EDT (1447 GMT), having risen to its highest since July 5 earlier. U.S. gold futures jumped 1.5% to $1,803.50 per ounce.

The dollar’s retreat bolstered gold’s appeal among overseas buyers, while benchmark U.S. Treasury yields also slipped, reducing the opportunity cost of holding non-yielding bullion.

 

 

ENERGY

 

 

Oil prices slump to lowest since before Ukraine invasion as recession fears weigh

 

 

Global oil prices dropped on Thursday to their lowest levels since before Russia's February invasion of Ukraine as traders fretted over the possibility of an economic recession later this year that could torpedo energy demand.

Benchmark Brent crude futures dropped more than 3% to $93.81 a barrel after touching a mid-session low of $93.20, the lowest since Feb. 21. West Texas Intermediate (WTI) crude futures fell 2.7% to $88.21 after touching the lowest since Feb. 3 at $87.97.

The fall in oil prices could come as a relief to large consumer nations like the United States and countries in Europe that have been urging producers to ramp up output to offset tight supplies and combat raging inflation.

 

 

 

STOCKS

 

 

Wall Street slides with bond yields as recession worries flare

 

 

Wall Street stocks slipped on Thursday while Treasury yields eased with oil as recession worries intensified among investors following the Bank of England's warning of a drawn-out downturn, which nudged sterling to a one-week low.

The S&P 500 (.SPX) lost 0.42% to 4,137 as of 14:43 GMT, following its close at a two-month high in the previous session. The Dow (.DJI) dropped 0.42% to 32,676, and the Nasdaq (.NDX) fell 0.49% to 13,188, retreating from a three-month peak.

The two-year Treasury yield eased 5.9 basis points to 3.0488%, while the 10-year yield slipped 7.2 basis points to 2.6756%.

 

 

10-year yield slides below 2.70% as jobless claims increase

 

 

U.S. government debt prices fluctuated Thursday morning after investors welcomed a new batch of positive economic data.

At around 12:50 p.m. ET, the yield on the benchmark 10-year Treasury note was down slightly at 2.697%. The yield on the 30-year Treasury bond rose to 2.983%. Yields move inversely to prices.

On the data front, initial jobless claims rose to 260,000 for the week ended July 30, in line with estimates from the Dow Jones. The latest reading comes ahead of the big jobs report Friday.

 

 

ANALYSIS

 

 

EUR/GBP likely to move higher in the near-term, three-month target at 0.86 – Danske Bank 

 

 

“We change our Bank of England call now expecting another 50bp rate hike in September and another 25bp in November, recognising that the Bank of England is probably not ready to fully stop hiking just yet despite rising recession risks. Further tightening is needed in order to cool extraordinarily high inflation pressure. We expect no rate hikes beyond the November meeting (although another 25bp rate hike in December seems like a close call at this point) and believe markets will start to focus even more on possible rate cuts in 2023 when the UK actually falls into recession.”

“We are slightly more dovish than markets, as the Bank of England has more emphasis on the economic outlook than what markets believe in. We still see a case for EUR/GBP to move slightly higher near-term on relative rates, targeting the cross at 0.86 in 3M. Further out, GBP usually appreciates vs EUR in an environment where USD performs and expect EUR/GBP to move back towards 0.84 in 12M.”

 

 

CHART

 

 

EURUSD Short Term: Upside favored

 

 

Technical View: Long position above 1.0145. Target 1.019. Conversely, break below 1.0145, to open 1.012.

Comments: The pair remains supported. Further advance favored.

Source: Trading Central 

 

CALENDAR

 

*Times in GMT

 

Source: FX Street Economic Calendar

Footnotes
https://www.reuters.com/markets/europe/sterling-slips-boe-delivers-big-rate-hike-warns-long-recession-2022-08-04/
https://www.reuters.com/article/global-precious/precious-dollar-dip-u-s-china-tensions-push-gold-to-a-new-1-month-peak-idUSL4N2ZG3QT
https://www.reuters.com/markets/commodities/oil-prices-rebound-after-dropping-lowest-months-weak-us-demand-2022-08-04/
https://www.reuters.com/markets/europe/global-markets-wrapup-1-2022-08-04/
https://www.cnbc.com/2022/08/04/us-treasury-yields-international-trade-loretta-mester-fed.html
https://www.fxstreet.com/news/eur-gbp-likely-to-move-higher-in-the-near-term-three-month-target-at-086-danske-bank-202208041637