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Yulya Lobanova • 2022-03-24

Hawkish Fedspeak propels yields, USD, cautious mood weigh on commodities but BTC stays firmer

Hawkish Fedspeak propels yields, USD, cautious mood weigh on commodities but BTC stays firmer

Risk-aversion keeps favoring the US dollar while the US Treasury yields’ rebound, following a pullback from the three-year top, exerts additional downside pressure on the market’s mood. Firmer yields also pushed USD/JPY towards a fresh six-year high as traders await the key data/events.

The sour sentiment pushed Wall Street benchmarks to snap a six-day uptrend before the European and the UK equities recovered during Thursday.

Brent oil and gold witness pullbacks while BTC/USD and ETH/USD remain on the front foot.

Markets await US PMIs and President Biden’s Europe tour comprising a meeting with NATO, G7 and European allies to garner more support for Russian sanctions.

Following the detailed performance report the key financial assets:

  • BRENT OIL struggles around two-week top with $122.00 rate.
  • GOLD remains indecisive around $1,940 after softer start of the day.
  • USD INDEX approaches 99.00, up 0.16% near 98.80 at the latest.
  • DOW JONES, NASDAQ and S&P 500 all snapped six-day uptrend.
  • DAX drops 0.50% reaching 14,200 rate whereas FTSE 100 reaches 7,460 level, up 0.25% intraday.
  • BTC/USD prints 0.40% daily gain by staying around $43,000.
  • ETH/USD rises 0.55% to $3,050, aiming for a $3,080 key hurdle.

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Anxious markets favor safe-haves but European equities got benefit of doubt

Hawkish Fedspeak and the Biden administration’s formal accusations of Russia as a ‘war criminal’ offered a double-barrel attack to the risk appetite the previous day. Adding to the sour sentiment recently were chatters suggesting the US push for heavy sanctions on Moscow.

Furthermore, China’s virus-led activity restrictions limit the market’s optimism but hopes of rate cuts from the People’s Bank of China (PBOC) helped keep the buyers hopeful. On the same line were the Bank of Japan (BOJ) Monetary Policy Meeting Minutes and comments from a BOJ policy maker suggesting no block to easy money.

However, Washington and London brace for more artillery help to Ukraine, which in turn adds strength to the risk-off mood. Additionally, Russian President Vladimir Putin also warned that ‘unfriendly’ nations will be asked to pay for oil imports in the ruble, adding to the hardships of the market and keeping USD/RUB on the back foot.

Talking about data, the preliminary Markit PMIs for Germany and Eurozone were upbeat for March but the UK Markit Manufacturing PMI slipped below expectations and prior readouts for the stated month.

Current trends

Firmer yields can keep challenging the market’s mood, joined by the Ukraine crisis and covid resurgence, which in turn pushes traders towards risk-safety.

⏫ 🟢 Strong buy: DAX, FTSE 100, and ETH/USD

⏬ 🔴Strong sell: Brent oil, DOW JONES, S&P 500

⬆️ 🟢Buy: USD Index, BTC/USD, Nasdaq

⬇️ 🔴 Sell: Gold, Silver

Will Europe ignore bloc needs to support Biden, Zelenskyy? Rather not.

Most headlines from the West suggest that US President Biden and his Ukrainian counterpart Volodymyr Zelenskyy will push hard to make Russia regret its invasion of Kyiv. However, the European Union (EU) relies heavily on Moscow’s oil and the old continent’s growth engine Germany has already signaled an economic shutdown without Russian oil. Hence, the bloc may not support all of the US and UK-led sanctions for Moscow, which in turn keeps the markets hopeful of a compromise and fresh life to peace talks should the matter be handled diplomatically.

Elsewhere, a slew of Fed policymakers are up for speaking and may bolster the hopes of a 0.50% rate-lift, as well as Quantitative Tightening (QT) in May, which in turn can fuel the US Treasury yields towards fresh multi-month highs and help the USD to rise further. However, the scheduled figures of the US PMIs for March, Durable Goods Orders for February and Weekly Jobless can avail a reason for a corrective move.

Talking about cryptos, the market’s confidence in e-currencies has been rising of late, suggesting further upside for the BTC and ETH. However, the ETH/USD battles the key hurdle to the north and becomes more interesting to watch.

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