Crude oil spiked Tuesdayday on the surprise sacking of the US secretary of state, but the lift was only temporary as the technical outlook weakened and the rally turned into a scramble to get out, says Ole Hansen, Saxo Bank head of commodity strategy, in Saxo's daily morning markets call.
"Prices jumped because Mike Pompeo, who is replacing Rex Tillerson as secretary of state, is a major hawk on Iran, just like Trump," he says. "However, the risk of renewed geopolitical risks and supply disruptions are likely to keep the downside risk capped, with $58/barrel being key on WTI and $60.5 on Brent."
Gold, too, received a boost from "Rexit" as well as another bout of US protectionism concerns arising from reports that President Trump is seeking tariffs on up to $60 billion of Chinese imports. Gold is likely to remain range-bound between $1,300 and $1,340/oz ahead of the almost certain rate hike on March 21. Still, the myriad geopolitical tensions now at play means that Hansen maintains a bullish outlook for the yellow metal "as long as it stays above $1,285/oz".
The threatened Trump trade war is causing waves in forex markets too, especially for the Canadian dollar after the country's prime minister, Justin Trudeau, admitted that he may have to introduce his own sanctions to prevent dumping into the US via Canada, says John Hardy, Saxo's head of forex strategy. "We saw a considerable CAD move to the downside on this," Hardy says.
Elsewhere, the US dollar is a bit weaker after yesterday's CPI release which "doesn't really shift interest rate expectations going into next week".
On the data front, today's US February retail sales warrant attention because, Hardy explains, they're "the last important data print before next week's Federal Open Market Committee outing".
Quarterly Outlook Q3 2022: The Runaway Train
- Winter is coming to the financial markets as central banks are tightening their grip. How spring will look is still a question.
European energy crisis: it will get worse before it gets betterThe winter in Europe will be tough, but whether the result is political chaos or sustainable, innovative solutions is still undecided.
A difficult and volatile quarter awaitsAs the year draws to an end, commodities continue to be at centre stage of the world with growth pockets political uncertainty.
The bright side: crises drive innovationThe positive spin on crises is that they come with solutions. It is worrisome that deglobalisation may be a response to this crisis.
Green transformation in China: renewable energy and beyondGoing green, China needs to span numerous energy sources to ensure stability, as every source comes with a challenge.
Asia: Intermittent solutions, but a faster renewable adoption curveAsian energy supply is being squeezed. This and the adoption of renewables may change the investment sentiment in the region.
FX: A Fed thaw needed to deliver a sustained USD turn lowerThe US Dollar can keep momentum when the Federal Reserve continues to tighten, leaving the rest to play to their drum.
Autumn can become ugly for equities and bond holders. Comfort for Dollar longsTechnical analysis suggests that equities could face a tough Q4 as could fixed income. US Dollar positions could provide some upside.
The next stock market sector to watch, with stocks going nuclearAs the world scrambles to find affordable, sustainable energy, nuclear is getting attention from politicians and investors alike.
The crypto space is getting cold when the hype disappearsCryptocurrencies face a winter of their own as retail investors and governments are asking tough questions.