Search LOGIN

Gold attempts relief rally as dollar decelerates

 

 

“Stay self-funded as long as possible.” — Garrett Camp

 

 HEADLINES

 

 

  • Sterling slides after BoE buys bonds, dollar hits 20-year high
  • Gold attempts relief rally as dollar decelerates
  • Oil prices rise on surprise drop in U.S. crude, fuel stocks; dollar weakness
  • Wall Street jumps over 1% in choppy trading as yields dip
  • 10-year yield drops the most since 2020 after touching 4%
  • GBP/USD may face further downside risks – HSBC
  • USDJPY Near Term: Downside favored

 

 

Sterling slides after BoE buys bonds, dollar hits 20-year high

 

Sterling tumbled against the dollar on Wednesday before paring some losses after the Bank of England (BOE) said it would step in to prop up the gilt market, and the dollar index touched a fresh 20-year high trading was volatile.

The BOE said it would buy as many long-dated government bonds as needed between now and Oct. 14 to stabilise financial markets, and added that it would postpone next week's start of its gilt sale programme.

As markets tried to digest what this meant for the pound, the currency whipsawed, jumping as high as $1.084 and falling as low as $1.0539. It was last down 0.4% at $1.0695.

 

 

COMMODITIES

 

 

Gold attempts relief rally as dollar decelerates

 

Gold rose about 2% on Wednesday as a retreat in the dollar rekindled some of its safe-haven appeal, although prospects of sharp rate hikes kept the non-yielding precious metal near a 2-1/2-year trough.

Spot gold climbed 2% to $1,660.62 per ounce by 1:49 p.m. EDT (1749 GMT), to recoup some losses from a slide to its lowest since April 2020 earlier in the day.

U.S. gold futures settled 2.1% higher at $1,670.00.

 

 

ENERGY

 

 

Oil prices rise on surprise drop in U.S. crude, fuel stocks; dollar weakness

 

Oil prices rose on Wednesday following unexpected drawdowns in U.S. crude and fuel stocks, and as the U.S. dollar pulled back from recent gains, boosting commodities prices.

Brent crude futures were up $2.82, or 3.3%, at $89.09 per barrel by 12:31 p.m. EST (1631 GMT). U.S. West Texas Intermediate (WTI) crude futures rose $3.20, or 4.1%, to $81.70 a barrel.

The dollar hit a fresh two-decade peak against a basket of currencies on Wednesday before pulling back. A strong dollar reduces demand for oil by making it more expensive for buyers using other currencies. In early afternoon U.S. hours, the dollar index was down 0.9%.

 

 

STOCKS

 

 

Wall Street jumps over 1% in choppy trading as yields dip

 

U.S stock indexes jumped more than 1% in volatile trading on Wednesday as easing Treasury yields lifted rate-sensitive growth stocks, while losses in Apple Inc after it dropped plans to boost iPhone production hurt the technology sector.

Equity markets also got a boost from a Bank of England decision to restore financial stability by buying as many long-dated government bonds as needed. The move lifted British bond prices and pushed global benchmark yields lower.

The yield on the U.S. 10-year Treasury bill came off 12-year highs to hit the day's low of 3.751%, while Germany's 10-year government bond yield , the benchmark for the euro zone, fell after touching a 11-year high.

 

 

10-year yield drops the most since 2020 after touching 4%

 

The benchmark 10-year Treasury yield dropped the most since 2020 on Wednesday, despite briefly topping 4% earlier in the session, after the Bank of England announced a bond-buying plan to stabilize the British pound.

The yield on the 10-year Treasury last dropped nearly 22 basis points to 3.739%, which is the most it’s dropped since 2020.

It hit a high of about 4.019%, or the highest level since October 2008, earlier in the session before erasing those gains.

Yields and prices move in opposite directions. One basis point is equal to 0.01%.

 

 

ANALYSIS

 

 

GBP/USD may face further downside risks – HSBC 

 

“The UK’s public finance position (in terms of relative debt dynamics) is going to worsen materially in the year ahead. The GBP does not enjoy any special privilege in terms of financing this burden.”

“The UK’s core balance has seen a large decline from a 2% of GDP surplus to an 8% of GDP deficit in the last two years (Bloomberg, 30 June 2022). This requires greater short-term capital inflows just to keep the GBP on an even keel.”

“If foreign investors fear an unsustainable debt burden being ‘paid for’ through inflation or FX depreciation, they may not be as willing to finance it in the first place. This points to the potential for an ever weaker currency valuation.”

 

 

CHART

 

 

USDJPY Near Term: Downside favored

 

Technical View: Short position below 144.82. Target 143.76. Conversely, break above 144.82, to open 145.31.

Comments: The pair breaks below support.

 

 

 

 

Source: Trading Central 

 

 

CALENDAR

 

 

*Times in GMT

 

 

 

 

Source: FX Street Economic Calendar

 

 

Footnotes
https://www.reuters.com/markets/europe/sterling-swallows-bitter-pill-dollar-advances-hawkish-fed-speak-2022-09-28/
https://www.reuters.com/article/global-precious/precious-gold-attempts-relief-rally-as-dollar-decelerates-idUSL4N30Z2XU
https://www.reuters.com/business/energy/oil-prices-mixed-hurricane-ian-output-cuts-support-dollar-weighs-2022-09-28/
https://www.reuters.com/markets/europe/futures-drop-after-report-apple-slowing-iphone-production-sparks-selloff-2022-09-28/
https://www.cnbc.com/2022/09/28/10-year-treasury-yield-tops-4percent-soaring-to-14-year-high.html
https://www.fxstreet.com/news/gbp-usd-may-face-further-downside-risks-hsbc-202209281410
 

UNLIMITED ACCESS!

The best way to keep track of your accounts. Get notifications
and access your dashboard any time!

Open a live or demo account, make secure deposits or get latest
market updates for free!