dollar dollar dollar

US dollar rolls over, putting commodities on a firmer footing; EUR still faces headwinds while RBA remains hawkish; Dimmer earnings season results

Equities 6 minutes to read
APAC Strategy Team

Summary:  The USD eased overnight although some of the gains returned in Asia, but commodities were on a firmer footing as EU gas supply threat looms. ECB and BOJ meetings to take the center stage this week as Fed remains in a blackout, and RBA minutes confirmed a hawkish stance. Hiring and spending alerts have started to come in from key companies, and this will likely be the theme of the current earnings season as cost pressures reign. EURUSD’s move higher from parity has limited legs with headwinds from gas supplies and Italy’s political crisis adding to ECB’s woes.

What’s happening in markets?

US stocks move from gains to losses weighed by Apple’s headcount slowing and oil rising

US stocks move from gains to losses, with S&P 500 (US500.I) and Nasdaq 100 (USNAS100.I) both falling over 0.8%, erasing half of Friday’s gains for two key reasons. Firstly, corporate earnings results and outlooks weighed on sentiment. And secondly, inflationary pressures rose up again; with the oil price jumping 4.7% to $102 on fears Russia will keep capping gas supplies to Europe, while a lower US dollar supports oil moving up, along with other commodities as they trade in the USD. 

Asian bourses see mixed trading as US futures suggest a mild bounce

Recession fears are likely to pick up again as earnings season gathers pace into the next week. The hiring and spending freeze from Apple and the hiring slowdown from Goldman Sachs is a precursor for what’s to come. But US equity futures pointed slightly higher with commodities on the front foot again, which helped Japan’s Nikkei 225 (NI225.I) to open the week with gains of 0.7%. Singapore’s STI (ES3) was down over 0.3% as Genting Singapore led the drop. China equities, meanwhile, failed to catch a bid from property sector support measures, and CSI 300 was down 0.5% while HIS declines close to 1%.

Australia’s ASX200 trades 0.2% lower, but holds an eight-day high, supporting by the coal price surging to a record and moving coal stocks higher. The Energy and Materials (mining) sectors are higher following the fall of the USD and the push up with commodity prices, while also stocking positive sentiment into commodities is that China’s property sector might get band aid stimulus. Total mortgages of $296 billion have been stalled as many people don’t want to pay their mortgages. Chinese lenders may be approving mortgage payments be paused, on properties with stalled projects. The Iron ore price (SCOA, SCOQ2) moved back above $100, attempting to make gains for the second day. The market is also parsing through quarterly results from BHP (BHP), energy company Ampol (ALD) and as well as digesting better than expected results from electronics seller JB Hi-Fi (JBH), who reported online revenue surged 50% in FY22. And finally, the market is factoring in the hawkish tone from the RBA minutes which reiterated further increases in interest rates will be made.

EURUSD upside remains capped

EURUSD turned back lower from 1.0200 after its run higher from parity. This week is key for EUR with three key catalysts. One, EU gas supplies remain under threat with Gazprom declaring force majeure on flows to a number of European buyers. This will further boost inflation in the coming months and drag on growth. Meanwhile, the ECB remains stuck between a hard and a rock place as a 25bps rate hike which the consensus expects this week will be too little too late. Eurozone June CPI is due today and a new fresh high will likely be printed at 8.6% y/y from 8.1% y/y previously. Moreover, now Italy's political uncertainty is also adding to the mix of headwinds for the EUR.

USDJPY remains rangebound ahead of the BOJ

The yen is seen in range amid caution over monetary policy meeting in Japan this week, but also as the USD has softened and recession concerns eased. USDJPY bounced off 138 level overnight but traded below 138.50 in Asia. While the Bank of Japan will likely maintain its stimulus at this week’s meeting, the BoJ's Outlook Report will garner greater attention as it is expected to show a downgrade in its growth forecast for FY2022 and an increase in its inflation forecast.

Oil (OILUKSEP22 & OILUSAUG22) steadies after overnight gains

Oil prices are softer in early Asia, after climbing above $100 a barrel overnight following last week's steep losses. While the broader oil market was firmer due to a softer dollar, oil also got a push higher due to EU gas supply issues and Saudis declining to make any promises on future output increases following President Biden's visit. Near-term market focus will be on the next OPEC+ meeting, which is scheduled for August 3.

Copper and other industrial metals find support

After a record decline last week, Copper found some support overnight mostly due to a softer dollar but also some news about China adding support measures for its real estate sector. China is encouraging lenders to extend loans to qualified real estate projects, and also allowing homeowners to temporarily stop mortgage payments on stalled property projects without penalties in order to keep the confidence in the property sector intact. Supply issues also remain in focus, especially from Peru.

Mixed company news and dimmer earnings season results

Goldman Sachs (GS) reported better than expected revenue, but it is the third major bank giving tepid signals ahead with the GS CFO saying the bank will slow hiring. Unlike JPMorgan, GS is not planning to pause buybacks. But it may bring in job cuts, like Wall Fargo and JPMorgan have laid off some home-lending workers. Apple (AAPL) added to concerns the Fed’s tightening will land the US in a recession with the company looking to limit spending and job growth at some divisions. This cautious stance mimics Amazon, Alphabet and Microsoft, which are all reducing spending. Sor far this earnings season 40 of the S&P500 companies shared Q2 results/ guidance levels. Average earnings growth is negative, (-15%), while most companies are guiding for a slowdown in revenue and higher costs.


What to consider?

US housing starts due today  

While the Fed is in a blackout period ahead of the July 26-27 FOMC meeting, the consensus has settled for another 75bps hike to 2.5% and that will probably give room to the Fed to keep its future options open. But, the doors for a 100bps rate hike are still not completely shut. US housing starts are due today, and will be key as Fed's Waller mentioned it as a factor when considering whether tightening needs to be accelerated to 100bps. Also, the Atlanta Fed GDPNow estimate is -1.5%, and this will also get a final update today before the GDP data is released next week.

EU gas supply uncertainty lingers

Russia's Gazprom has told customers in Europe it cannot guarantee gas supplies because of 'extraordinary' circumstances. The letter from the Russian state gas monopoly said it was retroactively declaring ‘force majeure’ on supplies dating from June 14. The news comes as NordStream 1, the key pipeline delivering Russian gas to Germany and beyond, is undergoing annual maintenance meant to conclude on Thursday, and reports suggest that supplies are unlikely to be restored. Force majeure is standard in business contracts and spells out extreme circumstances that excuse a party from their legal obligations. Meanwhile, demand is picking up as EU faces a heatwave.

China’s real estate support measures continue

Chinese authorities have announced more measures to support the ailing property sector after reports suggested that homebuyers were boycotting mortgage payments. Authorities are providing emergency funding for uncompleted residential construction projects, or even "buy" the projects to make sure completion will be faster. In addition, past due mortgage payments for uncompleted projects could avoid paying interest penalties for a period of time (to be decided by banks and local governments). This is aimed to calm down mortgage borrowers.

The clock is ticking for Italy

The Italian Prime minister Mario Draghi will tell lawmakers Wednesday if he’ll resign. Draghi’s resignation will mean a new political hurdle for Italy and the EU which is already facing gas supply threats and a growth-inflation conundrum which the ECB may find hard to address. According to the latest polls, the Five-Star Movement would get crushed. A center-right tie-up led by Giorgia Meloni’s Brothers of Italy would win if its members stick together. This would be very bad news for the Eurozone at the worst time ever (lower growth, fragmentation risk, low market volumes and risk of energy crisis this winter). Expect a faster rise in Italian yields if this should happen. The European Central Bank should nonetheless refrain from intervening since this is related to political uncertainty and not “unwarranted” tightening.


Potential trading and investing ideas to consider?

Oil prices to remain range bound

As Ole Hansen pointed out in Saxo’s recent commodity update, we have been watching the brent spread (the difference between physical spot oil and the Brent futures contract) trade at a record high, despite the oil price losing 20%. This means, physical buyers are paying a record premium for cargoes due to tight supply. While paper traders are selling oil futures contracts to hedge recessionary concerns. Saxo’s view is the oil price could stay range bound for the next few months, trading between $95 to $115.

RBA says inflation is here for longer than expected, thus will make more rate hikes ahead

The RBA made it clear it will make more hikes in the coming months, while making larger hikes and hikes between meetings, potentially. What gives the RBA room to do this is; the economy has strong momentum, with record high retail sales, and record low unemployment. The RBA also wants to cool inflation and see inflation getting worser in the near term, before peaking later in 2022. While global factors are also pushing up prices, strong local demand and a tight labour market are also contributing upward pressure on prices. Floods in east coast of Australia and floods in July will also add to inflation persisting for a longer period of time according to the RBA. Governor Low previously warned the benchmark rate may go to 2.5%, but today, interest rate futures pricing implies the means the cash rate will be 3.2% at the end of the year. This raised the concern the economy may well slip into a recession. AUDUSD rose to a third day high, 0.6826, but it still remains bearish at two-year lows. We see the hawkish tone of the Fed being stronger than the RBA, and this supports the USD. So we expect selling pressure to return to the AUDUSD.


For a global look at markets – tune into our Podcast. 


The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
Notification on Non-Independent Investment Research (
Full disclaimer (
Full disclaimer (

Saxo Bank (Schweiz) AG
The Circle 38

Contact Saxo

Select region


All trading carries risk. Losses can exceed deposits on margin products. You should consider whether you understand how our products work and whether you can afford to take the high risk of losing your money. To help you understand the risks involved we have put together a general Risk Warning series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. The KIDs can be accessed within the trading platform. Please note that the full prospectus can be obtained free of charge from Saxo Bank (Switzerland) ltd. or the issuer.

This website can be accessed worldwide however the information on the website is related to Saxo Bank (Switzerland) Ltd. All clients will directly engage with Saxo Bank (Switzerland) Ltd. and all client agreements will be entered into with Saxo Bank (Switzerland) Ltd. and thus governed by Swiss Law.

The content of this website represents marketing material and has not been notified or submitted to any supervisory authority.

If you contact Saxo Bank (Switzerland) Ltd. or visit this website, you acknowledge and agree that any data that you transmit to Saxo Bank (Switzerland) Ltd., either through this website, by telephone or by any other means of communication (e.g. e-mail), may be collected or recorded and transferred to other Saxo Bank Group companies or third parties in Switzerland or abroad and may be stored or otherwise processed by them or Saxo Bank (Switzerland) Ltd. You release Saxo Bank (Switzerland) Ltd. from its obligations under Swiss banking and securities dealer secrecies and, to the extent permitted by law, data protection laws as well as other laws and obligations to protect privacy. Saxo Bank (Switzerland) Ltd. has implemented appropriate technical and organizational measures to protect data from unauthorized processing and disclosure and applies appropriate safeguards to guarantee adequate protection of such data.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the U.S. and other countries. App Store is a service mark of Apple Inc.