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Mixed Market Sentiment: EU Stocks and US Dollar Index on the Rise
19.08.2022

There are no major economic releases scheduled for the rest of the day that can affect any major currencies. However, there continues to be plenty of volatility within the market as previous events keep influencing market participants. Some of the main events which have taken place are the Federal Reserve meeting minutes, comments from Federal Open Market Committee members and inflation figures.

US Dollar Index

The US Dollar Index continues to increase in value for a third consecutive day and the index looks like it will complete a bullish week if the price gains are retained throughout the day. This morning the price of the US Dollar Index reached a new monthly high (107.72) and continues to remain bullish throughout this morning’s Asian session.

USDJPY - 19.08.2022.png USD/JPY 1-Hour price chart on August 19th.

The strongest gains which the USD experienced was against the Japanese Yen (“JPY”). This morning, the USD/JPY formed its 7th consecutive day of gains. In addition to this, the instrument has also managed to break above the previous price wave (135.600).

Stock Market

The US stock market has lost momentum over the past 48 hours with all three indices either seeing minor gains or minor losses. The S&P 500 rose 0.2% after fluctuating between slight gains and intraday losses. It is currently up 0.1% for the week. The DowJones gained 0.1% and the NASDAQ rose 0.2% on the back of tech stocks. Overall the charts show a sideways trend. This potentially may be related to the Fed’s Meeting Minutes or due to technical price purposes. Yesterday, the price of the S&P 500 only increased by $9.70, the NASDAQ by $27 and the Dow Jones by only $18.

The stock market within the European Union looks slightly more positive in terms of the price movement over the past few days. However, most economists would agree that the EU stock market is at higher risk from geopolitical tensions and its energy crisis which is ongoing. This morning the DAX has increased by 0.52% and the CAC 40 by 0.45%. It should also be noted that the CAC 40 is the best-performing European index over the past month with gains just under 5.74%.

One of the latest developments from this morning regarding the European stock markets was related to the latest operating margins for the EU’s largest companies. The latest figures show that operating margins have increased to the highest level since COVID-19.

Crude Oil

The price of Crude Oil is back on the rise and is very close to reaching the weekly high, which was seen on Monday before the asset declined to new price lows. The price increase may be a result of more than one development over the past few days. The Crude Oil Inventories were much lower than originally expected which is positive for the price. Inventories showed US firms hold 7.1 Million Barrels less, rather than the expected 300,000 more barrels. This is also the strongest drop in supply we have seen since late April.

The new head of Organization of the Petroleum Exporting Countries (“OPEC”) also continues to support the price with various comments regarding the level of supply and downplaying the latest poor economic figures which were recently released for China. Lastly, the price also seemed to positively react to better than expected economic statistics from certain regions such as within the EU.

It should be noted that the global economic situation continues to put the level of demand at high risk, but at the same time, the level of supply is also an issue.

USOUSD - 19.08.2022.png Crude Oil 4-Hour price chart on August 19th.

Canadian Dollar

The Canadian Dollar (“CAD”) this week has struggled after being pressured by its latest economic releases. One of the strongest declines was against the US Dollar amid a decline in revenues received by the country from energy exports.

USDCAD - 19.08.2022.png USD/CAD 4-Hour price chart on August 19th.

According to Statistics Canada, the Commodity Price Index (“CPI”) lost 7.4% in July after falling 0.1% in the previous month to 19.1%, down 13.5% year-on-year. This may also be the reason that inflation dropped to 7.6% from 8.1%.

However, food prices, which are the second key component of the index, continued to rise, adding 0.9% in July. This movement is clearly seen in the calculation of Core CPI, excluding Food and Energy prices: the figure corrected to 6.6% from 6.5% a month earlier, and may potentially be the main problem for the Bank of Canada as petrol prices decline.

Traders will be looking to the Central Bank of Canada for clarification on its monetary policy. Will the regulator take a more dovish stance? This is also something which traders are contemplating with the Federal Reserve. Whereas, the Bank of England and the European Central Bank seem to be taking a very different stance. For this reason, the CAD may see very different scenarios depending on the currency pair.

Key takeaways:

  • EU stocks are again on the rise
  • US Dollar Index sees significant gains
  • The US stock Market loses momentum after the Fed’s latest report
  • Oil prices increase to the weekly high after inventories confirm a much lower level of supply.
  • New OPEC head supports the price of Oil by fueling supply fears
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