08/06/2022 - 08:17 UTCThe dollar index (USDX), after reaching a two-week high early on Tuesday, finally retraced to end the day moderately lower. The U.S. currency remains elevated against most of its major peers as Federal Reserve is expected to raise interest rates by 50 basis points next week and once more in July.
The yen continues to lose ground, trading close to its lowest levels since April 3rd 2002 against the dollar as recent strength in the dollar and diverging policies between the Fed and the Bank of Japan add further pressure on the Japanese currency.
In other news, Asian stocks gained on Wednesday, with the Nikkei adding a mere 0.45% on its value, while the Hong Kong 50 added 0.70% and the China A50 posted gains of more than 2%. On Wall Street, major market indices continue to move higher for a second consecutive day, however, gains were kept in check by worries that upcoming rate hikes and monetary policy tightening will weigh on global growth.
The World Bank on Tuesday slashed its global growth forecast by nearly a third to 2.9% for 2022, warning that Russia's invasion of Ukraine has compounded the damage from the COVID-19 pandemic, and many countries now faced recession.
Cryptos are back into bullish mode early on Wednesday, with Bitcoin trading right below the $31k mark, Ethereum approaching the $1,800 level and Cardano outperforming most of its major peers at just over $0.60 and climbing above Ripple to rank sixth among all Cryptos in terms of market capitalization. Overall market capitalization is right above 1.293 trillion as at Wednesday 5:00 AM GMT.
On Wednesday, scheduled fundamental data releases include the French Trade Balance, the Italian monthly Retail Sales figures, a Construction PMI report from the UK and quarterly reports on Employment Change and Revised GDP from the eurozone. Later in the day in the US, a monthly report on Wholesale Inventories and the EIA weekly crude oil inventories are due.
The euro fell at weekly lows on Tuesday hitting 1.06531 only to recover later in the day and close right below the 1.07 mark.
Both the Federal Reserve and the European Central Bank are expected to proceed with aggressive rate hikes, with the focus now shifted towards the ECB that meets on Thursday. Markets anticipate that it will at least lay the groundwork for rapid rate rises, if not begin already with a small rate hike.
Fundamental data releases for Wednesday include the French Trade Balance, the Italian monthly Retail Sales figures, Employment Change and Revised GDP from the eurozone while later in the day in the US, a monthly report on Wholesale Inventories and the EIA weekly crude oil inventories are due.
Gold prices moved moderately higher on Wednesday, posting gains of approximately 0.75% and reaching as high as $1853 per ounce.
In a speech held on Tuesday U.S. Treasury Secretary Janet Yellen stated to senators that she expected inflation to remain high and the Biden administration would likely increase the 4.7% inflation forecast for this year in the upcoming budget proposal. Yellen also added that gold-related transactions involving Russia may be sanctioned, and any efforts to circumvent U.S. sanctions using gold will be closely monitored.
Gold traders are now looking ahead to Fridays U.S. CPI data for further clues on the monetary policy path forward.
As China continues to remove COVID-19 restrictions in top cities and as global supplies remain on the low, oil prices remain elevated with the WTI futures contract trading at $120 per barrel as at 07:08 AM GMT on the iFOREX Europe platform
Despite last week’s decision by the OPEC+ to increase production and the fact that refineries are working at almost full capacity, global supplies are still not expected to be enough to meet rising demand from pandemic recovery and to replace lost Russian supplies.
On Wednesday the Energy Information Administration (EIA) publishes its weekly change in terms of crude oil, gasoline and distillate inventories.
Major stock market indices around the world traded marginally higher on Tuesday, supported by gains in Wall Street led by a surge in energy and technology stocks. European shares also rose with the Germany 40 recovering from a low of 14453 to end the day at 14602.
However, some pressure in the markets came by the news that Credit Suisse is set to experience a group-wide loss in the second quarter with the bank citing Russia's invasion of Ukraine combined with significant monetary tightening by major central banks in response to the substantial increase in inflation, and the unwinding of COVID-related stimulus measures for the quarter’s woes.
The focus is now shifted on the ECB as it meets on Thursday and has been widely expected to make statements on possible rate hikes within the third quarter.
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