On Tuesday, the US Dollar scored a powerful turnaround, attracting surprise buying strength and rallying to multi-day highs. This tremendous movement is indicative of continued volatility in the global currency market, driven by key economic indicators and strains from rising geopolitical tensions. With the upcoming US economic data releases, including the JOLTs Job Openings report, traders remain vigilant regarding potential market shifts.
The most severe impact was on the GBP/USD pair, collapsing to four-week lows near 1.3340. This drop is a result of ongoing fiscal woes within the UK, as economic uncertainty continues to hang like a shadow on investor confidence. Similarly, the EUR/USD came under fresh downside pressure. It fell to the 1.1610 area, marking its lowest level over the last four days. These changes are a reminder that the British pound and the euro continue to lose value as the US Dollar surges.
Crude oil prices across the commodities complex surged, at one point reaching four-week highs. They actually broke through that $66.00 per barrel barrier for West Texas Intermediate (WTI). Geopolitical tensions ramped up before the OPEC producers meeting set for this weekend. These new tensions led many to worry about the stability of supply. The market’s reaction shows a very high sensitivity to what arguably should be exogenous factors determining and affecting oil prices.
It’s been quite a run for silver prices, closing in on $41.00 per ounce today. That increase is seemingly the largest spike we’ve experienced in more than a decade and a half. With robust interest across a variety of sectors, silver prices are skyrocketing. More to the point, investors view precious metals as a strong hedge against economic turmoil.
The USD/JPY pair extended its recent recovery, regaining ground to five-week highs around the 149.00 level. This upward movement is consistent with the overall trend of continued US Dollar strength against most major currencies. Futures market traders are looking at three or four interest rate cuts by the Fed before the end of this year. This analysis, if done right, should change the conversation between currencies.
The AUD/USD broke hard on the news and dropped to multi-day lows near 0.6480. This decline was exactly on its 100-day simple moving average (SMA). This drop speaks to the forces of volatile commodity prices and changing risk appetite among investors.
Market participants were all eyes on the release of the US weekly MBA Mortgage Applications data. They remain watchful for any adverse effects it could have on housing and economic activity. The API is scheduled to publish its weekly report on US crude oil inventories. This is something that would greatly influence oil prices and mood in the commodity markets.