Asian markets were in no mood to advance today, given the weak Wall Street lead and the unresolved debt-ceiling dramas. With risk appetite in short supply, major bourses moved lower due to the lack of progress from Washington.
While the expectation is that a deal will get done, with neither side willing to cede ground until the very last minute, market nerves are being tested which is why we are seeing a reluctance by investors to take on risk-assets.
Oil rises on Saudi Minister’s comments
Comments from the Saudi energy minister provided a boon for oil, with the price having an upswing on the back of the punchy remarks. The minister warned that those betting on the oil price falling should “watch out.”
While these comments have given the oil price a jolt higher, the effect will likely wear off in the absence of any new concrete action from OPEC+ to reign in supply. But for the time being at least, the comments have propped up the oil price and it remains to be seen if short sellers call a bluff on the warning.
The USD continues to be underpinned by comments from Fed officials regarding the outlook for US interest rates.
In the past week there has been a chorus of Fed members making the case for an aggressive interest rate stance, which has resulted in the market scaling back expectations of softer rates by year-end. Interestingly, the one exception was the Fed Chairman Jerome Powell, who did not seem to be singing from the same hymn sheet as the other members as he sounded decidedly dovish by contrast.
But on balance, Fed officials have been on the front foot regarding rates, and this has lifted both treasury yields and the USD.
Any potential gold upside remains impeded by US Dollar strength, with price contained between key support and resistance zones (support at $1960, resistance at $1985). With Fed officials giving no indication that monetary policy will loosen anytime soon, the yield outlook remains supportive of the greenback and somewhat detrimental to the gold price. In the short term, if US macro indicators justify the hawkish stance from the Fed this will keep gold under pressure.
New Zealand dollar dives
The NZD took a dive today after the RBNZ indicated that they are done with rate hikes. The RBNZ lifted rates by 25bp as expected to 5.5%. The accompanying statement basically said that the terminal rate has been reached, which sent the Kiwi Dollar into a nosedive. The NZDUSD rate fell over half a cent on the news.
Looking ahead, markets will await the FOMC meeting minutes to see if the internal discussions of the Fed match the hawkish tone heard from members over the last week. And of course, any news from Washington regarding the latest on the debt ceiling could also stir financial markets in the coming days.
Market commentary and analysis from Tim Waterer, chief market analyst at KCM Trade
