Comment of the Day
Video commentary for July 5th 2022
A link to today's video commentary is posted in the Subscriber's Area.
Some of the topics discussed include: copper, oil, gold, silver break lower, Europe makes new reaction lows, Dollar breaking higher versus Euro and Pound, Nasdaq-100 rebounds as Treasury and Bund yields compress.
Euro Tumbles to 20-Year Low, Putting Parity With Dollar in Sight
This article from Bloomberg may be of interest to subscribers. Here is a section:
“It is hard to find much positive to say about the EUR,” said Dominic Bunning, the head of European FX Research at HSBC. “With ECB sticking to its line that we will only see a 25bp hike in July – at a time when others are hiking much faster – and waiting for September to deliver a faster tightening, there is also little support coming from higher yields.”
Money-market traders are betting ECB will deliver around 140 basis points this year, down from more than 190 basis points almost three weeks ago. The repricing gathered pace after a string of weak economic data last week, with traders trimming bets again on Tuesday after French services PMI was revised lower.
Investors have also been more cautious on the euro due to the risk of so-called fragmentation, when economically weaker nations see unwarranted spikes in borrowing costs as financial conditions tighten. The ECB is expected to deliver further details of a new tool to backstop more vulnerable countries’ debt at their policy meeting later this month.
The losses Tuesday were compounded by poor liquidity and selling in euro-Swiss franc, according to three Europe-based traders. The euro fell as much as 0.9% against the Swiss franc to 0.99251, the lowest level since 2015.
“The FX market is not back up to full liquidity given the US holiday,” said Mizuho’s Jones. “Any given size of trade is likely to have a greater impact on market movement.”
My view - Russia’s calculus is simple enough. They are betting the economic pain European countries are enduring because of their support for Ukraine will be so great they will be willing to make a deal sooner rather than later.
Gold Drops to Six-Month Low as Dollar Surges on Recession Fear
This article may be of interest to subscribers. Here is a section:
Gold slumped to the lowest in more than six months as the dollar rallied amid growing recession fears that caused losses across risk assets.
The greenback surged to the highest in more than two years as investors retreated to the haven, putting pressure on bullion. US stocks briefly slumped more than 2% amid fears that the Federal Reserve’s rate hikes to damp inflation could cause a slowdown in the world’s largest economy.
A pronounced drop in the euro also aided the dollar’s gain, driven by bets that the European Central Bank will be slower to tighten monetary policy than the Fed. Recession concerns in the bloc are particularly acute due to fears Russia will cut supplies of natural gas.
Gold fell 1.9% to $1,774.26 an ounce, after earlier touching the lowest since mid-December 2021. The Bloomberg Dollar Spot Index climbed 1.1%. Silver and platinum slid, while palladium edged lower.
My view - The Dollar is not only rallying against the Euro and Pound. It is surging against just about every currency. The Bloomberg Dollar Index, which has less of a Euro weighting, is rallying to test the 2020 peak. The regular Dollar Index has already broken higher.
Eoin's personal portfolio: leveraged positions in commodities closed
One of the questions subscribers ask most often is how to find details of my open trades. To make it easier I will simply repost the latest summary daily until there is a change.