Forex Today: Risk Off, Dollar Up, Stocks and Commodities Down – 28 September 2022
Markets remain firmly in the grip of risk-off sentiment, as the US Dollar Index and US Treasury Yields reach further long-term highs, and stocks and commodities tumble.
Following last week’s rate hike by the US Federal Reserve, markets remain firmly in risk-off mode, with the US Dollar Index rising powerfully to reach new multi-year highs, and stock and commodity markets falling firmly. The 10-Year US Treasury Yield exceeded 4% for the first time since 2010, and the US Dollar is making multi-year highs against the Euro, the New Zealand Dollar, the Swedish and Norwegian Kroner, the South African Rand, and the Turkish Lira. The strong bearish trend in the EUR/USD currency pair is especially notable as this pair has a great track record in respecting trends, so trend traders have been very interested to follow this lower. It is likely that the EUR/USD will reach still lower prices over the coming days.Stock and commodity markets are performing poorly. The benchmark S&P 500 Index, and the Hong Kong Hang Seng Index both hit new 2-year lows, while Gold and WTI Crude Oil are also falling to significant new lows.The US Federal Reserve’s Kashkari has added to risk-off sentiment by commenting that there is “a lot of tightening in the pipeline”.The British Pound reached an all-time low against the US Dollar shortly after markets opened in Asia on Monday, with the GBP/USD currency pair hitting $1.0350 at one point before rebounding quite strongly to get back above $1.0900. However, the price has begun to fall again, and seems to be trading somewhat bearishly near $1.0650. The Pound’s very strong fall has been mostly triggered by the UK government’s announcement of plan to cut taxes by a historic amount, financed by massive borrowing. Markets do not like the plan, which has just been strongly criticised by the International Monetary Fund. UK yields have risen dramatically, and it is likely that the UK’s credit rating will be impacted.It now seems very likely that the Nordstream pipeline breach close to Denmark was caused by targeted Russian military action. It does not seem likely to provoke a direct military response from NATO, but the incident is contributing somewhat to the risk-off environment.Hurrican Ian has reached Cuba, and its powerful winds have taken the entire Cuban electricity grid offline. Hurricane Ian is expected to make US landfall tomorrow at Tampa, Florida.US CB Consumer data came in higher than expected yesterday, suggesting there is still healthy consumer demand in the US despite the ongoing technical recession.Daily new coronavirus cases globally dropped last week for the tenth consecutive week, giving rise to the hope that the pandemic is finally over in any meaningful sense. Last week, President Biden declared the pandemic “over”.It is estimated that 67.9% of the world’s population has received at least one dose of a coronavirus vaccination, while approximately 7.9% of the global population is confirmed to have contracted the virus at some time, although the true number is highly likely to be much larger. Total confirmed new coronavirus cases worldwide stand at over 621.2 million with an average case fatality rate of 1.05%. The rate of new coronavirus infections appears to now be significantly increasing only in Taiwan and Russia.
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