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Dollar near recent peaks as Fed looms, growth fears weigh

“It’s fine to celebrate success but it is more important to heed the lessons of failure.” — Bill Gates 

 

 

HEADLINES

 

 

  • Dollar near recent peaks as Fed looms, growth fears weigh
  • Gold stalls as pre-Fed verdict jitters grip investors
  • Oil falls on additional SPR release, lower consumer confidence
  • Wall Street hit by Walmart wipeout, Gas woes knock Europe
  • Natural gas hits highest level since 2008, on pace for best month ever as Russia cuts supply
  • EUR/CHF with a target at 0.95 in 1-2 months – TDS
  • GBPUSD Near Term: Downside favored

 

 

Dollar near recent peaks as Fed looms, growth fears weigh

 

The dollar held just below multi-decade peaks on Tuesday as traders awaited a rate hike from the U.S. Federal Reserve but wondered whether hints of a slowing economy may prompt a shift away from its focus on inflation.

The euro fell 0.96% to $1.0122 but was hemmed in by uncertainty over Europe’s energy security, which is not helped by a looming cut in the westbound flow of Russian gas.

The yen steadied at 136.64 per dollar.

The Fed concludes a two-day meeting on Wednesday. Traders have been dialing back expectations as markets try to figure out if or when policymakers might pause inflation-fighting efforts amid signs the economy is starting to slow.

 

 

COMMODITIES

 

 

Gold stalls as pre-Fed verdict jitters grip investors

 

Gold prices were stuck in a narrow range on Tuesday, as lower Treasury yields amid lingering recession woes offset a firmer dollar, while investors turned their attention to the U.S. Federal Reserve’s two-day meeting.

Spot gold was flat at $1,719.49 per ounce by 1438 GMT. U.S. gold futures were little changed at $1,719.10.

U.S. Treasury yields fell sharply, as a looming gas supply crisis in Europe kept the markets on edge about global recession risks.

 

 

ENERGY

 

 

Oil falls on additional SPR release, lower consumer confidence

 

Oil prices fell on Tuesday, paring gains made earlier in the session on lower consumer confidence and the expectation of another 20 million barrels of crude oil to be released from the U.S Strategic Petroleum Reserve.

Brent crude futures fell 35 cents, or 0.3%, to $104.80 a barrel by 12:57 p.m. EDT (1657 GMT).

U.S. West Texas Intermediate (WTI) crude fell92 cents, or 1%, to $95.78.

 

 

STOCKS

 

 

Wall Street hit by Walmart wipeout, Gas woes knock Europe

 

World shares skidded and bond markets rallied on Tuesday as some disappointing earnings, the prospect of another super-sized U.S. interest rate hike this week, and Europe's looming gas crisis all kept investors on edge.

Asia had been buoyed overnight by a new Chinese plan to tackle its property crisis and as tech giant Alibaba sought a primary listing in Hong Kong , but Europe and Wall Street could not keep up.

A Walmart profit warning and another cut in the International Monetary Fund's global growth forecast shoved Wall Street's main markets lower as they opened . Europe's STOXX 600 (.STOXX) started to buckle too after an earlier boost from a profit upgrade from consumer goods giant Unilever (ULVR.L) and higher commodity stocks.

 

 

Natural gas hits highest level since 2008, on pace for best month ever as Russia cuts supply

 

Natural gas prices are surging around the world as scorching temperatures stoke demand for the fuel, and as Europe’s push to move away from Russian fuel roils global energy markets.

U.S. natural gas futures surged more than 11% at one point on Tuesday to $9.75 per million British thermal units (MMBtu), the highest level since July 2008. The contract later pulled back slightly, and traded at $9.146 per MMBtu at 10:50 a.m. on Wall Street for a gain of 4.8%.

Natural gas is now up more than 77% for the month, putting it on track for the best month going back to the contract’s inception in 1990.

 

 

ANALYSIS

 

 

EUR/CHF with a target at 0.95 in 1-2 months – TDS 

 

“Despite the ECB (European Central Bank) delivering a 50bp 'surprise' hike alongside an anti-fragmentation tool, the decision in totality appears to be more of a faux-flex and likely marked peak hawkishness. While adopting a "meeting by meeting" approach to rate decisions might introduce more policy optionality in the curve, it seems the ECB was reluctant to commit to being as aggressive going forward. They also seemed to confirm that more policy aggression now is borrowing from tightening in the future.”

“Data is only going to get worse from here and Germany is likely to be at the heart of it. We believe the EZ is headed for recession in H2 (unlike the ECB), so the capacity for aggressive hikes amid weak growth and an impending energy crisis is constrained. The latter will receive significant focus given shortage concerns.”

“We think the SNB (Swiss National Bank) is willing to allow FX strength to help offset import price inflation. That, alongside a more supportive current account backdrop (unlike the implosion in the EZ) allows the CHF to be used to diversify away from well-populated USD longs. Indeed, we are concerned that the USD may be on a tactical pause.”

 

 

CHART

 

 

GBPUSD Near Term: Downside favored

Technical View: Short position below 1.204. Target 1.1945. Conversely, break above 1.204, to open 1.209.

Comments: The pair remains under pressure. Further weakness favored.

 

 

 

 

 

Source: Trading Central 

 

CALENDAR

 

 

*Times in GMT

 

 

 

 

Source: FX Street Economic Calendar


 

Footnotes
https://www.cnbc.com/2022/07/26/forex-markets-currencies-fed-inflation-rate-hike-economic-outlook.html
https://www.cnbc.com/2022/07/26/gold-markets-federal-reserve-interest-rates-dollar-recession.html
https://www.reuters.com/business/energy/oil-rises-russian-gas-cut-europe-may-encourage-switching-crude-2022-07-26/
https://www.reuters.com/markets/europe/global-markets-wrapup-1-2022-07-26/
https://www.cnbc.com/2022/07/26/natural-gas-hits-highest-level-since-2008-on-pace-for-best-month-ever-as-russia-cuts-supply.html
https://www.fxstreet.com/news/eur-chf-with-a-target-at-095-in-1-2-months-tds-202207261632
 

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