Wednesday's Federal Open Market Committee minutes were received as slightly hawkish, with the dollar gaining ground and equities suffering. "The S&P 500 index broke the key 2,700 line," reports Saxo Bank head of equity strategy Peter Garnry, adding that the Fed made upward revisions to its growth and inflation outlooks.
"We are seeing a weakness in short-term USD funding, and widening credit spreads – this likely reflects cash repatriation on the part of US corporates," Garnry notes.
Saxo's equities head also adds that we are in the middle of the worst macro environment in eight months with Eurozone PMI figures, US existing home sales, and US consumer confidence all falling short of expectations.
"We have the German Ifo survey out at 09:00 GMT today, so watch that as well as the $29 billion auction in seven-year US Treasuries," Garnry concludes.
The rise in the dollar has impacted commodities as well with gold seeking support and crude oil trending lower ahead of today's report from the US Energy Information Administration at 16:00 GMT.
"A new report shows the International Energy Agency seeing demand growth covered by non-Opec producers for the next two years, leaving Opec and Russia with little room to raise output," notes Saxo commodities head Ole Hansen. "The key support levels to watch are $61/barrel in Brent crude and $58/b in WTI," Hansen says.
While gold traders are increasingly nervous given the metal's fifth consecutive failure (since 2014) to break resistance, and gold prices are weighed down by a stronger dollar, Hansen believes that poor macro results and shaky equities markets remain supportive of gold with the current situation remaining firmly in the "buy the dip" zone.
Finally, Hansen reports that agricultural commodities look counter-cyclical and are ignoring the turmoil seen in stock and bond markets; Saxo's commodities head also reports that drought in Latin America is driving soybean prices notably higher.