The US financial markets were on edge ahead of major financial market-moving economic data that investor started positioning themselves ahead of. The US Dollar Index (DXY) also remains strong, currently trading near the top of its DXY weekly range. That said, the rut did have a small step back on Wednesday. The DXY’s recent turn reflects this major reversal of sentiment on the markets. Traders are on the lookout for key indicators that might shift the tide of monetary policy.
In the currency markets, the Aussie showed wild swings. It briefly spiked above the 0.6500 resistance against the US Dollar. Forex markets almost always move with these types of headlines and tweets. It is driven by both external geopolitical forces and internal economic shifts. At the same time, the Euro (EUR) posted a small increase, pushing the EUR/USD exchange rate higher again to retest levels above 1.1600.
The Japanese Yen (JPY) was under pressure, with the USD/JPY cross hitting new two-week lows near 152.80. The British Pound (GBP) struggled this week, weakening for the fifth consecutive day. It bottomed in the low-1.3300s as it digested the recent challenges facing the UK economy given the evolving macroeconomic backdrop.
On the commodity side, WTI crude oil prices jumped to two-week highs. They broke into the mid-$62s per barrel. This jump happened as a result of the heretofore-unenforced US sanctions in response to Russia’s invasion of Ukraine. These sanctions increased concerns about supply in global oil markets while the Russian invasion of Ukraine continued.
Additionally, Gold recovered most of its past losses, returning to the $4,150 area per troy ounce. Now gold is staging an impressive comeback. This renewal is due to increasing geopolitical pressures and risk-averse investor behavior as they wait with visible anticipation for the release of US Consumer Price Index (CPI) figures. The gradual increase in gold prices reflects that investors are going to a flight to safety given all the uncertainties.
Silver prices recovered from earlier lows. They blasted through the $49.00 per ounce level, confirming that a new flight to safe-haven precious metals has begun. This conversion goes hand-in-hand with recent broader market trends that have found investors fleeing to safety in an era of geopolitical turmoil.
Market participants are looking ahead to the October US Inflation Rate report as well as the advanced S&P Global Manufacturing and Services PMIs. Their focus, unsurprisingly, is on how these numbers will change the conversation about monetary policy. The preliminary University of Michigan Consumer Sentiment gauge will provide more insight into consumer behavior. It’s most highly anticipated, however, for the insights it’s likely to provide into Americans’ economic confidence.