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7
Sep

BoC Decision, Eurozone GDP, U.S. Trade Balance

calendar 07/09/2022 - 13:12 UTC

The U.S. dollar traded again stronger starting Thursday with the USDX index moving to a new high, while emerging market dollar pairs like the USD/CNH, USD/ZAR and USD/MXN also moved to the upside.

Sentiment in the stock markets was somewhat mixed with European markets like the Germany 40 and Europe 50 retaining some gains at the end of the day after a very weak start into the new week, while U.S. and Asian indices like the US Tech 100, Japan 225 (Yen) and China A50 headed clearly lower.

U.S. and Canadian trade balance data for July will be published on Wednesday followed by the interest rate decision of the Bank of Canada (BoC). After the BoC hiked rates by 100 basis points (bp) during its previous meeting, another significant rate hike is expected to be announced today with the consensus pointing towards a 75 bp hike. Economists surveyed by Bloomberg expect another 50 bp hike towards the end of the year and that after rates peak at 3.75% over the following years rates would gradually come down again towards 2.75% by the end of 2024.

Also on Wednesday U.S. and Canadian trade balance data will be published. Later during the Asian-Pacific trading session Japanese GDP statistics and Australian trade balance data can be expected.

EUR/USD

While the dollar continued to appreciate against other major currencies as seen in the market move of the USDX, the EUR/USD pair for now stabilised somewhat just below 0.99 after reaching a new two decades low in the early afternoon on Tuesday. For this the EUR/JPY pair headed strongly to the upside and other majors like the EUR/GBP and EUR/AUD were also moving higher by Wednesday morning.

German manufacturers' orders data for July was disappointing, showing a decline of 1.1% on a monthly basis, while consensus was for a smaller decline similar to the -0.4% seen in the previous month.

On Wednesday German industrial production data will be published, followed by Italian retail sales statistics and the eurozone GDP for the second quarter.

EUR/USD

Gold

After a brief recovery in the night hours on Tuesday, gold prices were heading steadily lower reaching levels below $1,700 for a troy ounce in the spot markets by Wednesday. A similar downside was seen in the silver market, though for now the price of silver remains well above the low from last week, while gold prices were less than half a per cent above the low from September 1st. Palladium prices were also under pressure, while platinum retained its earlier gains and is still up compared to last Friday.

The strong dollar as well as rising yields on 'safe haven' bonds could have put pressure on the price of gold with the 10-year U.S. T-Note yield reaching for the first time since June again levels above 3.35%.

Gold

WTI Oil

Oil prices continued to decline and reached by Wednesday morning a new low since January despite multiple geopolitical factors like the stalling Iran nuclear deal, OPEC+ lowering production quotas in October and the EU discussing even more measures against Russian energy exports. Some factors that could be at least to some extent behind the recently dropping oil prices might be the expectations of a recession in multiple countries in the coming quarters as well as the continued use of lockdowns in China as a means to curb the spread of the coronavirus.

Due to the American Labour Day holiday on Monday, the release cycle of the weekly statistical bulletin by the American Petroleum Institute (API) will be pushed back by one day to Wednesday, while the weekly petroleum status report by the Energy Information Administration (EIA) is set for publication on Thursday.

WTI Oil

US 500

Stock markets headed lower on Tuesday with an increased volatility observed around the time the ISM Non-Manufacturing Index was released. The index unexpectedly improved for August rising from 56.7 to 56.9, whereas a moderate drop was anticipated. On the other hand indices released by S&P Global were less upbeat with their global services PMI falling to 43.7.

Shares of companies involved in the development and manufacturing of COVID vaccines like BioNTech (-6.05%) and Moderna (-6.21%) were under pressure with the latter being the worst-performing component of the S&P 500 index that day. The WSJ was quoted reporting that health authorities in the United States could change their recommendations on booster vaccines to just once a year for healthy individuals.

Lululemon Athletica (+4.25%) continues with its strong performance after its positive earnings results were published last week and the share was on Tuesday once again a top performer among those included in the NASDAQ Composite Index.

With the earnings season mostly over rather few companies are yet to disclose their earnings this week, which will include Nio and GameStop on Wednesday followed by Bilibili and DocuSign on Thursday.

US 500

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