Main
• The rebound of the dollar, euro, and yuan from important support levels quickly faded away. On the agenda is the risk of foreign currency movement to the lows of the month with all that it entails.
• The global US dollar remains stable at highs, while European and Asian currencies continue to trade at lows. International government bond rates are also in no hurry to decline, and bond yields are one step away from 16-year highs. And all this a day before the Fed meeting.
• The volatility of the commodity market is increased, the factor of Middle Eastern geopolitics dominates in the commodities course. Brent oil, gold and NG gas, with the next aggravation in the international arena, can rewrite the annual highs.
In detail
The global US dollar is stable a day before the two-day Fed meeting on the rate, and this is a factor against the recovery of currencies from the global reserve basket, and, in fact, are still trading at the lows of the year. The likelihood of the US Central Bank maintaining a high funding rate for a long time is significant. DXY remains in the area of 106.5 points. A reversal of the currency trend is possible only with signals of a weakening of the Fed monetary policy.
On the commodity market, futures move from side to side, but the upward trend for all instruments prevails.
Oil, after Friday’s lightning-fast jump to $90.5, this morning reached $89, and is again rising to the round mark. Gold updated five-month highs, and covered all previous losses in a month, and an ounce was almost $2010, now it’s retreating to around $2000. NG gas immediately jumped to $3.65/Mmbtu, but is already correcting below $3.35.
Let us keep in mind that an escalation of the conflict can immediately inflate prices on the commodity market for the designated futures in the direction of their annual highs.
The US stock market, having hit five-month lows, is in a rebound. The guidelines were in the premarket. Index futures rise to 0.7%, driving a near percentage point rebound in European equity indices. The Russian market is growing within half a percent, and here the currency factor is putting pressure – the strengthening of the ruble is now preventing exporters from growing.
On Monday morning, the Russian ruble experienced short-term weakness, rose above 94.3, was above 99.6, and reached 12.85. But they did not have enough strength for more, and foreign currencies have not yet been able to develop Friday’s rebound from the monthly bottom. The dollar is already at 93, the euro is slightly higher than 98.5, the yuan is back at 12.7. Our morning assessments have so far been confirmed.
The Central Bank immediately raised the rate to 15% due to the acceleration, but it was the devaluation that made a significant contribution to the acceleration of prices. The private sector and corporations began to shift gloomy devaluation sentiments onto inflation expectations. Therefore, now we need to curb currency risks, and this alone can reduce fears and slow down consumer activity. Moreover, a high rate should lead to an increase in the cost of lending for import transactions, and increase the attractiveness of ruble assets compared to foreign ones.
Also, October 30 is the last day for payment of the single export tax, which was postponed due to the weekend from the 28th. As the tax period passes, this factor will supposedly disappear from the ruble drivers, but there are also standards for the mandatory sale of exporters’ proceeds, and they will be in effect for another six months.
From a technical point of view, the resistance area just below 94.5 in the pair remained stable, and the expected downward rebound took place again. The fundamental level for the dollar, and the dynamics of all other currencies is tied to this, is still 92.5.
The important level is a little more than half a percent, and if the support does not hold, and, moreover, the daily close is below the important level, then an impulse may take place in the direction of the desired 90. Other currencies will follow the American. And this is still the basic scenario for the fall.
2023-10-30 13:00:00
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