US and European futures are trading lower as traders are very much focused on the wild moves in the European bond markets. Yesterday’s surge in German bond yields scared market players, and the spread between the German and Italian bond yields has started to tighten up, which means that Germany, which was once considered the safe haven bond place, is no longer a place where traders can feel comfortable.
Many warnings are being issued about global economic growth, especially regarding the biggest economy of the world, the US economy, and yet we are seeing a lot of enthusiasm among oil traders. Although we saw a retracement in oil prices yesterday and today, prices are struggling to find a direction. The reason that we don’t yet see a serious sell-off in oil prices is purely based on the fact that traders know that OPEC+ is not going to let oil price curves go in contango, and as soon as there is a risk in relation to oil prices, OPEC will likely come out swinging. The recent cut of two million barrels of oil production supported oil prices, but now, once again, all of that optimism has begun to fizzle out. Having said that, oil prices will only be under threat if Crude oil falls back below $85, which some think is a possibility.
Bitcoin prices are still very much stable and still, continuing to trade between 19K and 20K. This is despite the fact that we have seen tremendous strength coming back for the dollar index after the US NFP data, and a lot of bullish commentaries have come out from a number of Fed members who think that inflation is stubbornly high.
This week we are going to get the US inflation reading, and it is expected to print a lower reading, perhaps 8.1%, but still, that is not going to be enough for market players. This represents a threat to bitcoin prices because what could potentially happen is that the Fed members may think that they need a number of meetings during which they need to increase the interest rate by 75 basis points before they can actually ease off from the gas. This could bring more strength for the dollar index, which may push the bitcoin price further lower.
The precious metal is struggling once again. As we mentioned last week, the price level of 1,700 was an important one to hold on to, but bulls have been outpaced by the bears, and this is what we have now. Gold prices are moving lower, and the path of the least resistance is skewed to the downside.
Gold traders are laser-focused on the FOMC Minutes event after the strong US NFP data, and they are also going to keep a close eye on the US CPI data as well.
A number of Fed members will be speaking today, and their comments are likely to give us some clues in relation to what we may hear in the FOMC Minutes. A bullish outlook could push the dollar index higher, and we may see oil prices moving lower.
UK gilts are very much under focus among investors and traders. The wild moves that the Bank of England was trying to keep under control, saw the bank intervene and hit the market once again yesterday. Traders are just not comfortable that the UK’s government can control its debt and whether it has a sufficient plan to bring the country back on track. The Chancellor of the Exchequer announced yesterday that he is bringing the budget forward, and this seems to be another desperate move by the Chancellor. The question really is what the Chancellor is going to announce in his budget; one thing is for certain, and that is taxes are likely to be increased, and this means more pressure on the public, which is already struggling with their daily lives due to higher energy bills and soaring inflation.
The British Pound has started its slide once again, and it is moving lower against the dollar. Most traders believe that the Pound is still going to hit parity against the dollar or at least it is going to re-visit its recent lows. Generally speaking, there are more bears on the British Pound, and it is only a matter of time before more may follow.