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Lingering inflation keeps Wall Street muted to end brutal quarter

 

“You can’t make anything viral, but you can make something good.” — Peter Shankman

 

 

 HEADLINES

 

 

  • U.S. dollar share of global FX reserves rises in Q2; euro share slips -IMF data
  • Gold bound for dismal quarter on aggressive rate hike fears
  • U.S. oil & gas rig quarterly growth slowest in two years -Baker Hughes
  • Lingering inflation keeps Wall Street muted to end brutal quarter
  • 10-year yield hovers at 3.76% after trading above 4% briefly this week
  • EUR/USD: Euro to remain below parity – Danske Bank
  • AUDUSD Near Term: Downside favored

 

 

U.S. dollar share of global FX reserves rises in Q2; euro share slips -IMF data

 

The U.S. dollar's share of currency reserves reported to the International Monetary Fund rose in the second quarter, with the Federal Reserve in the midst of an aggressive tightening cycle aimed at stamping out uncomfortably high inflation.

The greenback's share of reserves rose to 59.5%, from 58.8% in the first quarter, IMF data showed on Friday.

The euro's share, however, slipped to 19.8% in the second quarter from 20% in the first, declining for three straight quarters.

 

 

COMMODITIES

 

 

Gold bound for dismal quarter on aggressive rate hike fears

 

Gold rose to a one-week high as the dollar retreated from recent highs on Friday but bullion was headed towards its worst quarter since March last year, buckling under fears of impending large interest rates by the U.S. Federal Reserve.

Spot gold rose 0.4% to $1,666.79 per ounce by 12:24 a.m. EDT (1624 GMT) and has gained 1.4% so far this week. U.S. gold futures added 0.5% to $1,677.10.

Gold is down 7.7% for the quarter so far. This would also be bullion’s sixth straight monthly drop, its longest streak of monthly declines in four years.

 

 

ENERGY

 

 

U.S. oil & gas rig quarterly growth slowest in two years -Baker Hughes

 

U.S. energy firms this week added oil and natural gas rigs for a third week in a row, but growth in the third quarter slowed due to recession fears and nagging supply shortages.

The oil and gas rig count, an early indicator of future output, rose one to 765 in the week to Sept. 30, energy services firm Baker Hughes Co said in its closely followed report on Friday.

Baker Hughes said that puts the total rig count up 237, or 45%, over this time last year.

U.S. oil rigs rose two to 604 this week, while gas rigs fell one to 159.

 

 

STOCKS

 

 

Lingering inflation keeps Wall Street muted to end brutal quarter

 

Wall Street and global stocks made up little ground on Friday, with government bond yields and the dollar holding near recent peaks, as higher-than-expected inflation continued to weigh on markets.

Fresh personal consumption expenditures (PCE) price index data, tracked by the U.S. Federal Reserve as it considers more interest rate hikes, showed a rise of 0.3% last month after dipping 0.1% in July. Euro zone inflation hit a record high of 10% in September, surpassing forecasts for a 9.7% rise, flash inflation data showed.

Fed Vice Chair Lael Brainard said on Friday the U.S. central bank would need to maintain higher interest rates for some time as part of its effort to tame inflation and must guard against lowering rates prematurely.

 

 

10-year yield hovers at 3.76% after trading above 4% briefly this week

 

Treasury yields were little changed on Friday, after volatile trading this week, as markets prepared to close out an awful month.

The yield on the benchmark 10-year Treasury rose nearly 2 basis points to 3.76% at around 1:50 p.m. ET. The note has had a highly volatile week, soaring to a near 14-year high before seeing its steepest inter-day decline since 2020 during Wednesday’s session.

The policy-sensitive 2-year Treasury yield gained 1 basis point on Friday to 4.18%.

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

 

 

ANALYSIS

 

 

EUR/USD: Euro to remain below parity – Danske Bank 

 

“Fundamentally, the US should continue to be a high(er) interest rate market and equities continue to appeal to foreign investors. This means the US is likely to attract capital, which helps the USD.” 

“The large negative terms-of-trade shock to Europe vs US, a further cyclical weakening among trading partners, the coordinated tightening of global financial conditions, broadening USD strength and downside risk to the euro area makes us keep our focus on EUR/USD moving still lower (targeting 0.95) – a view not shared by the consensus.”

“The key risk to shift EUR/USD towards 1.15 is seeing global inflation pressures fade and industrial production increase. The upside risk also include a renewed focus on easing Chinese credit policy and a global capex uptick but neither appear to be materialising, at present.”

 

 

CHART

 

 

AUDUSD Near Term: Downside favored

 

Technical View: Short position below 0.6477. Target 0.6418. Conversely, break above 0.6477, to open 0.6515.

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/us-dollar-share-global-fx-reserves-rises-q2-euro-share-slips-imf-data-2022-09-30/
https://www.reuters.com/article/global-precious/precious-gold-bound-for-dismal-quarter-on-aggressive-rate-hike-fears-idUSL4N3112YY
https://www.reuters.com/markets/commodities/us-oil-gas-rig-quarterly-growth-slowest-two-years-baker-hughes-2022-09-30/
https://www.reuters.com/markets/europe/global-markets-wrapup-1-pix-2022-09-30/
https://www.cnbc.com/2022/09/30/treasury-yields-slip-across-the-board-after-sharp-stock-sell-off.html
https://www.fxstreet.com/news/eur-usd-euro-to-remain-below-parity-danske-bank-202209301638

 

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