Dollar Stalls As Markets Rotate

STATE OF THE MARKETS

Dollar stalls as markets rotate. US stocks closed lower on Thursday, except the small cap Russell (+0.56%), with strength seen in financials, energy and communication. Dow (-0.47%), Nasdaq (-0.13%) and S&P (-0.10%) pared earlier gains and finished the day lower as investors rotated into the old economic sectors.

With Feds soon to hike, bonds lost demand and sent yields higher, with the 10Y benchmark hitting 175 basis points for the first time in nine months; stalling the Dollar index (DXY) around 96.20 to 95.80 mark for the past five weeks. 

In the commodities market, inflation concerns have seen many commodities surging higher as demand is expected to remain strong in 2022. Crude continues its upward trajectory to $80/bl while iron ore piercing $126/tn, though gold was fixed lower to $1,790.77/oz as yields rise.

In the FX space, overall sentiments are less bullish as Yen gained traction into the demand territories across short and medium term horizons. On Friday, markets look forward to seeing the latest earnings report from Greenbrier (GBX) and Acuity Brands (AYI) as well as the very much awaited non-farm payroll.

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OUR PICK – No New Picks

No new picks until after NFP. Bonds prices fell on lower demand, sending yields higher. Major averages moved lower while small caps climbed higher. Investors are not running into bonds right now as a higher rate is coming. While waiting, they bid for small caps and defensive names in energy, financials and communication. Furthermore, despite the pressure in gold as yields rise, we see many consumables commodities like soybean, corn, coffee, wheat, oats, and meats surging higher.

What we believe will be in focus for the NFP Friday, other than the unemployment number, are the average hourly earnings and average weekly hours. Investors would like to know how much wages have risen and whether workers are working more hours. This will give us a clue about inflation and confirm the up move in commodities.

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This article is for general information purpose only. It is not an investment advice or a solicitation to buy or sell any securities/oz. Opinions expressed are of the authors and not necessarily of MFM Securities Limited or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.