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Oil falls as investors assess recession risks

 

 

“A person who is quietly confident makes the best leader.” — Fred Wilson 

 

HEADLINES

  • Euro slumps after bleak PMIs, dollar drops vs yen
  • Gold slips after Powell reiterates aggressive tightening plan
  • Oil falls as investors assess recession risks
  • Wall Street struggles for direction on growing recession fears
  • Russia’s ruble hit its strongest level in 7 years despite massive sanctions. Here’s why
  • NZD/USD to retest recent lows below 0.6200 – CIBC
  • USDJPY Near Term: Downside favored

 

 

Euro slumps after bleak PMIs, dollar drops vs yen

 

 

The euro fell across the board on Thursday as weaker-than-expected German and French PMI data confirmed that the euro zone economy is struggling to gain traction, prompting traders to trim bets on big interest rate hikes from the European Central Bank.

High prices in the euro zone meant demand for manufactured goods fell in June at the fastest rate since May 2020 when the coronavirus pandemic was taking hold, with S&P Global's headline factory Purchasing Managers' Index (PMI) falling to a near two- year low of 52.0 from 54.6.

Against the U.S. dollar, the single currency declined 0.4% to $1.0522. It earlier declined below a key $1.05 level for the third time this week. The euro also declined 1.6% versus the Japanese yen

 

 

COMMODITIES

 

 

Gold slips after Powell reiterates aggressive tightening plan

 

 

Gold gave up initial gains and edged lower on Thursday as the dollar regained momentum after U.S. Federal Chairman Jerome Powell reiterated more aggressive monetary tightening to tame inflation, even as economic risks mount.

After Powell said the Fed’s commitment to curbing inflation was ‘unconditional’, the dollar index resumed its uptick, dimming gold’s appeal, especially among overseas buyers.

While gold is considered a hedge against inflation and economic uncertainties, rising interest rates reduce appeal for the asset, which pays no interest.

 

ENERGY

 

Oil falls as investors assess recession risks

 

 

Oil prices fell as investors weighed the risks of recession and how fuel demand will be affected by rising interest rates and tight supplies.

Brent crude futures dipped by 67 cents, or 0.6%, to $111.07, having dropped as low as $108.04 earlier in the session.

Both benchmarks plunged 3% on Wednesday and are at their lowest since mid-May.

Investors are continuing to assess how worried they need to be about central banks potentially pushing the world economy into recession as they attempt to curb inflation with increases to interest rates.

 

 

STOCKS

 

 

Wall Street struggles for direction on growing recession fears

 

 

U.S. stocks indexes were mixed on Thursday as gains in healthcare and megacap technology stocks offset losses in energy and other economically sensitive sectors amid growing recession fears.

Trading has remained volatile after a bruising selloff last week sparked by concerns that aggressive interest rate hikes to tame stubborn inflation could hurt economic growth and corporate profits.

As government bond yields fell to two-week lows, rate-sensitive growth and technology stocks gained, with Apple Inc (AAPL.O) adding 0.8% and Microsoft Corp (MSFT.O) 0.9%.

Rising inflation is also taking a toll on consumer confidence as latest data showed business activity slowed considerably in June.

 

 

CURRENCIES

 

 

Russia’s ruble hit its strongest level in 7 years despite massive sanctions. Here’s why

 

 

Russia’s ruble hit 52.3 to the dollar on Wednesday, its strongest level since May 2015. On Thursday afternoon in Moscow, the currency was trading at 54.2 to the greenback, slightly weaker but still near seven-year highs.

That’s a world away from its plunge to 139 to the dollar in early March, when the U.S. and European Union started rolling out unprecedented sanctions on Moscow in response to its invasion of Ukraine.

The ruble’s stunning surge in the following months is being cited by the Kremlin as “proof” that Western sanctions aren’t working.

 

 

ANALYSIS

 

 

NZD/USD to retest recent lows below 0.6200 – CIBC 

 

 

“The NZD is facing depreciation pressure sourced in a number of factors, including that from broad negative global risk sentiment. We see pressures continuing to build in coming weeks, and anticipate a retest of recent NZD/USD lows below 0.6200.”

“Already there has been evidence of slowing in consumer and business sentiment, and of a decline in house prices. Challenges to domestic activity from sharply higher rates are a negative that will be exacerbated by weak activity in China – New Zealand’s largest trading partner, and by the outrun of higher rates and softer outlooks globally. In this environment, higher policy rates in New Zealand will not support the currency beyond present levels.”

“A key area of resistance in NZD/USD is between 0.6530 (January low) and 0.6576 (June high). While spot is held below this band, risk is for another test of the downside.”

 

 

CHART

 

 

USDJPY Near Term: Downside favored

 

 

Technical View: Short position below 135.6. Target 133.9. Conversely, break above 135.6, to open 136.6.

Comments: The pair breaks below support.

Source: Trading Central 



 

CALENDAR

 

 

*Times in GMT

Source: FX Street Economic Calendar


Footnotes
https://www.reuters.com/markets/us/dollar-languishes-amid-lower-us-yields-recession-fears-mount-2022-06-23/
https://www.reuters.com/article/global-precious/precious-gold-slips-after-powell-reiterates-aggressive-tightening-plan-idUSL4N2YA2UH
https://www.cnbc.com/2022/06/23/oil-markets-recession-interest-rate-inflation-oil-demand.html
https://www.reuters.com/markets/europe/futures-rise-lower-treasury-yields-boost-high-growth-stocks-2022-06-23/
https://www.cnbc.com/2022/06/23/russias-ruble-is-at-strongest-level-in-7-years-despite-sanctions.html
https://www.fxstreet.com/news/nzd-usd-to-retest-recent-lows-below-06200-cibc-202206231640
 

 

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