Equities are off, the dollar's ascent has been stopped in its stride and sentiment has turned sour after the EU retaliated to the the Trump tariffs with a raft of levies of its own.
"So another directional change as we went from risk on to risk off. It's unclear what the driver is though as Peter Garnry, out equity strategist, told me yesterday it could be a function of the Daimler profit warning as well as the trade war itself," says John J Hardy, Saxo's Head of Forex Strategy.
Furthermore, two central bank meetings yesterday saw a hawkish tilt with Norges Bank pointing to a September hike and Bank of England upgrades increasing the possibility of a UK hike in August, Hardy adds. This suggests that the central bank convergence theme is back in play. "But we have our eyes out and we're open minded as to whether the dollar momentum has just hit the wall," he concludes.
Meanwhile it's been a troubled week for commodities as we've seen the dollar continue to strength until yesterday, reports Ole Hansen, Saxo's Head of Commodity Strategy. "Much of the commodity weakness was due to dollar strength, except in metals whose weakness came from trade fears," he says.
But today's big focus, of course, is the Opec and non-Opec series of meetings in Vienna, which kick off today. "The Opec members had a technical meeting yesterday and it seems like they are looking at a production rise, without the support of Iran and Venezuela. They're not changing the output ceiling, the cap will still be in place, but what they're doing is sharing out the lost output from Venezuelan production. The market is taking this positively but with the caveat that we don't know what they'll do and whether Venezuela will veto the deal," Hansen says.
Note that the closed meeting starts at 11:00 CET and a press conference is scheduled for 13:00 CET.
Quarterly Outlook Q2 2022: The End Game has arrived
- Shocks from covid and the war in Ukraine have forced the global financial and political world to change, but what will the end game be?
Productivity and innovation have never been more importantAs the world economy hits physical limits and central banks tighten their belts, could equities be facing a 10-15% downside?
The great EUR recovery and the difficulty of trading itIf the terrible fog of war hopefully lifts soon, the conditions are promising for the euro to reprice significantly higher.
Tight commodity markets – turbocharged by war and sanctionsWith supply already tight, commodities keep powering on. But will it last for yet another quarter?
Between a rock and a hard placeGeopolitical concerns will add upward price pressures and fears of slower growth, while volatility will remain elevated.
The Great ErosionInflation is everywhere and central banks try to combat it. But will they get it under control in time?
Australian investing: Six considerations amid triple Rs: rising rates, record inflation and likely recessionWhile global financial markets are struggling in an uncertain world, the commodity-heavy Australian ASX index is poised to keep a positive momentum.
Cybersecurity – the rush to catch up with realityWith the invasion of Ukraine, governments and private companies are rushing to reinforce their cyber defenses.