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Oil tumbles more than 9%, breaks below $100 as recession fears mount

 

“You get in life what you have the courage to ask for.” ― Oprah Winfrey

 

 

HEADLINES

 

 

  • Euro slumps to two-decade low as recession fears grow
  • Gold dips as rate hike bets, strong dollar trump safe-haven bids
  • Oil tumbles more than 9%, breaks below $100 as recession fears mount
  • S&P 500, Dow slip as recession fears mount
  • Euro slides to 20-year low against the dollar as recession fears build
  • AUDUSD: Potential for renewed declines on global growth concerns – MUFG
  • AUDUSD Near Term: Downside favored

 

 

Euro slumps to two-decade low as recession fears grow

 

Safe-haven demand strengthened the dollar on Tuesday to levels last seen in 2002 while the euro slumped to two-decade lows as the latest surge in European gas prices fueled recession concerns.

The dollar index rose 1.5% and the euro fell as much as 1.75% to lows last seen at the end of 2002. It was the biggest single-day decline for the euro and the dollar's largest gain since COVID-19 roiled markets in March 2020.

Other currencies also tumbled as recession fears tanked stocks in Europe and on Wall Street. Japan's yen was near 24-year lows again, the Canadian dollar fell to almost 19-month lows and Norway's crown fell more than 2% as gas workers went on strike, adding to European growth concerns.

 

 

COMMODITIES

 

 

Gold dips as rate hike bets, strong dollar trump safe-haven bids

 

Gold fell on Tuesday pressured by rate hike expectations and a stronger dollar, and dipped below a key support level of $1,800 an ounce amid growing recession fears.

Spot gold fell 1.9% to $1,774.19 per ounce as U.S. gold futures dropped 1.52% to $1,774.1.

The dollar firmed near two-decade peaks, making gold less attractive for overseas buyers.

While gold is considered a hedge against inflation, interest rate hikes have heaped pressure on the non-yielding asset.

 

 

ENERGY

 

 

Oil tumbles more than 9%, breaks below $100 as recession fears mount

 

Oil prices tumbled Tuesday with the U.S. benchmark falling below $100 as recession fears grow, sparking fears that an economic slowdown will cut demand for petroleum products.

West Texas Intermediate crude, the U.S. oil benchmark, slid 9%, or $9.83, to trade at $98.60 per barrel. The contract last traded under $100 on May 11.

International benchmark Brent crude shed 9.9%, or $11.46, to trade at $102.04 per barrel Tuesday.

Both contracts posted losses in June, snapping six straight months of gains as recession fears cause Wall Street to reconsider the demand outlook.

 

 

STOCKS

 

 

S&P 500, Dow slip as recession fears mount

 

The S&P 500 and the Dow fell on Tuesday, with investors fretting about the possibility of a recession as central banks across the world take aggressive actions to stem a surge in inflation.

U.S. stocks have been under relentless selling pressure this year, with the benchmark S&P 500 index (.SPX) recording its steepest first-half percentage drop since 1970, as the Federal Reserve moves away from easy-money policy by raising borrowing costs.

Investors are now waiting for minutes from the Fed's meeting in June on Wednesday as they brace for another 75-basis-point rate hike at the end of the month.

 

 

Euro slides to 20-year low against the dollar as recession fears build

 

The euro fell to its lowest level in two decades on Tuesday as fears of a recession in the euro zone ramped up, with gas prices soaring and the Ukraine war showing no signs of abating.

The euro shed around 1.3% for the session to hit $1.029 by mid-afternoon in Europe, having earlier been as low as $1.028.

Euro zone inflation hit a record 8.6% in June, prompting the European Central Bank to give markets advance notice of its intention to hike interest rates for the first time in 11 years at its July meeting.

 

 

ANALYSIS

 

 

AUDUSD: Potential for renewed declines on global growth concerns – MUFG 

 

“RBA has taken the official policy rate to 1.35%, the highest since May 2019 and the first-ever back-to-back 50 bps hike. Around 40 bps of tightening is currently priced for the August meeting and 175 bps through the five remaining meetings this year. As is our view for the Fed and other major central banks, we do not expect the RBA to hike through the remainder of the year.” 

“We maintain that risks for AUD are to the downside. The global growth outlook is deteriorating and the fact that AUD/USD is now lower on the day after a 50 bps rate hike underlines the potential over the near-term for renewed declines on global growth concerns.”

 

 

CHART

 

 

AUDUSD Near Term: Downside favored

 

Technical View: Short position below 0.688. Target 0.67. Conversely, break above 0.688, to open 0.695.

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

 

 

 

 

Source: Trading Central 



 

CALENDAR

 

 

*Times in GMT

 

 

 

 

Source: FX Street Economic Calendar

 

Footnotes
https://www.reuters.com/business/aussie-ascendant-before-rba-yen-pressured-by-rising-us-yields-2022-07-05/
https://www.cnbc.com/2022/07/05/gold-markets-interest-rates-inflation-recession.html
https://www.cnbc.com/2022/07/05/oil-tumbles-more-than-8percent-breaks-below-100-as-recession-fears-mount.html
https://www.reuters.com/markets/europe/recession-fears-pull-futures-lower-2022-07-05/
https://www.cnbc.com/2022/07/05/euro-slides-to-20-year-low-against-the-dollar-as-recession-fears-build.html
https://www.fxstreet.com/news/audusd-potential-for-renewed-declines-on-global-growth-concerns-mufg-202207050728
 

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