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26
Sep

Cable at Record Low, Global Sell-Off, German Ifo Survey

calendar 26/09/2022 - 07:59 UTC

As the dollar continued to appreciate this brought with itself considerate movements in connected markets such as the Cable (GBP/USD) falling to a new record low. While the USD/JPY rate also edged a bit higher, it remains for now well within the range seen over the past two weeks. The USD/TRY pair continues to move moderately higher, though against other majors like the euro, the Turkish currency has appreciated over the past few days.

Gold prices were also affected by the recent turn of events in the markets with gold prices down to the lowest levels since the spring of 2020 with the price down by more than 1.7% on Friday. Though compared to some other markets like some equity indices or the highly volatile pound sterling (GBP) the price of gold could be even described as relatively steady in this chaotic market.

U.S. market indices like the US 500 and the US Tech 100 even after the losses on Friday remain for now above the low from June, while European markets like the Germany 40 and France 40 fell clearly below the low seen during in June. It might be also interesting to watch the Italian market. The Italy 40 index already declined by 3.5% on Friday and further volatility remains possible in the new week just as the "far-right leader" Giorgia Meloni is set win the election and could become the country's prime minister. Ahead of the election European Commission chief von der Leyen delivered a veiled warning that the bloc could implement measures if a country deviates from democratic principles referring likely to the talks about measures to be taken against countries like Poland and Hungary.

EUR/USD

Extreme volatility in the FX markets driven to a significant part by a further appreciation of the dollar against other major currencies also affected the EUR/USD pair, which reached by Monday morning yet another 20-years low falling at times below the 0.96-level after falling already on Friday by around 1.5%.

Eurozone data released on Friday was not particularly helpful either with the eurozone services PM falling from 50.2 to 48.9, while the manufacturing PMI also took a bigger hit than anticipated, reaching 48.5 compared to 49.7 in the previous release. Any number below 50 is indicative of rather negative expectations among surveyed purchase managers.

EUR/USD

GBP/USD

One of the most significant developments over the recent days was the significant strengthening of the dollar coupled with the steep drop in other currencies, in particular the pound sterling. The GBP/USD rate was at times on Monday morning down by more than eight per cent compared to the rate seen on Friday at midnight. Continued statements indicative of a hawkish monetary policy approach by the Fed Chairman and perceived increased risk from the Russian so-called referendums taking place in Ukraine, with those regions in parts later likely to be claimed by Russia are seen as some of the drivers in this market. The cable (GBP/USD) is now at record lows well below anything seen after the Brexit referendum or the early stages of the pandemic, with analysts now awaiting how the Bank of England (BoE) will respond to this rapid shift in markets just as the currency pair moved closer and closer towards a parity level with the greenback.

GBP/USD

WTI Oil

Oil prices came also under pressure in the rather negative market sentiment with the price of WTI crude oil down by 5.5% on Friday alone with a further downside seen by Monday morning. Oil prices can be subject to significant volatility particularly in today's market driven by multiple forces. On one hand spare capacity even among OPEC countries remains limited, while the for now futile talks with Iran and continued escalation with Russia are seen as factors not favouring the creation of additional global market supplies for the time being. At the same time the demand side also poses significant uncertainty as there are more and more signs for a global recession, while on the other hand if China should wake up from its COVID lockdowns demand could once again increase.

The U.S. Baker Hughes Oil Rig Count published as always on Friday was up by three operating oil rigs to 602 now reported in operation as the metric continued to recover for the second week in a row.

As usual this week on Tuesday the American Petroleum Institute (API) publishes its weekly statistical bulletin which among its data includes also statistics on crude oil, gasoline and distillate stockpiles. Then on Wednesday the Energy Information Administration (EIA) also releases similar data in its weekly petroleum status report.

WTI Oil

US 500

Major stock market indices like the US 500 and US Tech 100 continued pushing lower, though for now indices remain above the low from June. Market volatility picked up just as the Fed Chairman Jerome Powell started making his remarks at the "Fed Listens" event under the headline "Transitioning to the Post-pandemic Economy".

Following the further drop in oil prices energy sector stocks (US Energy ETF -7.11%) were some of the worst-performing equities on Friday, while health care sector stocks (US Health Care -0.83%) were overall more stable compared to the movement in the index value. Four out of the five worst-performing stocks included in the S&P 500 index were from the oil/energy sector including Halliburton (-8.94%).

This week on Thursday Nike and Micron are set to publish their respective quarterly results.

US 500

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