Today’s foreign exchange market was particularly volatile. The EUR/USD currency pair took a breather on the popular currency pair’s recent rebound and encountered fresh downside impetus. It even retested that critical support area below 1.1550 again, as increasing worries over the economic health of the eurozone weighed heavily on the single currency. Economic releases such as German ZEW Economic Sentiment and euro area ZEW Economic Sentiment are looming. These numbers would be hugely important to determining how the euro does. European Central Bank (ECB) President Christine Lagarde heads the agenda next, with a much anticipated speech. Her comments could provide important clues as to what’s coming in terms of monetary policy.
On the commodities front, gold prices hit their highest in three weeks, breaking through the $1,100 per troy ounce ceiling. This uptrend in gold prices fits with broader trends across financial markets toward increasing uncertainty and greater demand for safe-haven assets. The price action in gold signifies the sudden turn of investor sentiment, which has turned against risk in an unstable economic environment.
Elsewhere, the US Dollar Index (DXY) continued its upward march, trading back toward the 99.70 area. This increase was propelled by an increase in US Treasury yields along the entire curve. Instead, this led the US dollar to be much stronger than other currencies. Higher yields, at least on their face, would seem to signal a confidence in the economy’s continued growth that may require stronger interest rates down the road.
Hope for a resolution to the US government shutdown has increased accordantly. This optimism is spilling over into sentiment across the broader risk complex. As talks progress, traders continue to hope for an agreement that would strengthen both the pace of economic activity as well as investor sentiment.
Additionally, the USD/JPY currency pair rose to three-day highs past the 109.00 level. Yet, it is still struggling against the 154.00 barrier. The Japanese Yen has made new lows on the dollar. This dramatic decline underscores the divergent monetary policies of the US and Japan.
In the energy sector, the price of a barrel of American West Texas Intermediate (WTI) crude oil surpassed the key $60.00 mark. Though this bump up has occurred, worries about an oversupply in international markets continue to weigh on prices, limiting any possible future upside potential. As they read the future path of prices, traders are keeping a close eye on supply dynamics.
The risk complex was more positive across the board today, with SLV shares hitting silver prices with a one-two-punch of bullishness. Silver prices shot up to three-week highs above $17.00 per ounce. This increase underscores a trend towards increasing investments in precious metals, such as gold and silver, as a safe-haven investment.
There’s a torrent of high-impact economic data releases lined up for the day. Market participants will be paying especially close attention to what happens in currency and commodity markets. These markets will push and pull every trading strategy out there. Farther down the road, investors will respond nimbly to any fresh updates on economic well-being and geopolitical worries.