Sentiment is mixed. The S&P500 eked out small gains after a volatile session. The FOMC minutes, released yesterday, came as a confirmation that the Federal Reserve (Fed) remains fully committed to bringing inflation down, even if it means slower growth.
But, the recession talk, lower energy prices, and the softening Fed hawks despite yesterday’s hawkish minutes weigh on the US 10-year yield, and the the 2-10 year portion of the US yield curve inverted, which is read as ‘recession’ is either here, or about to hit the fan.
Gold prices are on a freefall mode due to the strong dollar, and silver extends losses below $20 level. The mint ratio is above 90, hinting that either gold is still expensive, or silver is relatively cheap. But whether their prices will go up or down depends on US dollar.
The dollar trades at 20-year highs, and keeps pushing higher.
Activity in Fed funds futures price in more than 93% chances for a 75bp hike by the end of this month, but many people think that the deteriorating economy since the Fed’s June could bring the Fed to hike by 50bp only instead of 75bp this month. The market chatter hints that the market pricing has room to get more dovish rather than more hawkish.
In oil, we now see a clear pivot, as investors prefer selling tops rather than buying dips. Tensions between G7 and Russia is an upside risk in the short run, but if the attention remains on demand side, we could see limited upside, and a further downside in oil prices.
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