Dollar is the only safe haven in town, Oil soars

Attention remains on the USD rally and the decline in equity prices. During the Asian session, key releases include the New Zealand NZD Business Confidence report and Australian retail sales. Later, the focus will shift to preliminary September inflation figures from Spain and Germany. Additionally, the Eurozone’s Consumer and Business Confidence data will be released. In the US, notable releases include weekly Jobless Claims and a new Q2 GDP reading.

Here is what you need to know on Thursday, September 28:

The US Dollar Index recorded a 0.45% gain, marking its fourth consecutive daily gain and reaching its highest closing level since November. Higher Treasury yields, upbeat US data, and risk aversion in the market supported the strength of the Greenback.

The 10-year Treasury yield settled at 4.60%, the highest since 2007. Simultaneously, US stocks finished with mixed results, indicating prevailing negative sentiment. The Dow Jones declined by 0.20%, while the NASDAQ gained 0.22%.

Data released on Wednesday showed a surprising 0.2% increase in Durable Goods Orders for August, contrary to expectations of a 0.5% decline. On Thursday, upcoming data includes the weekly Jobless Claims report, the third revision of Q2 growth figures, and Pending Home Sales data.

Analysts at Wells Fargo on Durable Goods Orders:

Durable goods orders exceeded expectations, and a surge in core capital goods shipments will lift estimates for third quarter business spending. Yet after backing out a surge in defense spending and accounting for steep downward revisions, the report gets a lot less exciting.

EUR/USD accelerated its decline, reaching levels below 1.0500, which haven’t been seen since January. Spain and Germany are scheduled to release their preliminary September Consumer Price Index (CPI) figures. It is anticipated that Spain will show a rebound in its annual inflation rate, while Germany is expected to report a significant drop. These initial inflation figures are crucial for shaping monetary policy expectations and can impact the markets. Additionally, Eurostat will release its Business and Consumer Sentiment report.

Sebastian-B Becker, Senior Economist at Deutsche Bank Research on German inflation: 

Owing to the petering out of two larger base effects – stemming from last summer’s fuel discount and 9-Euro-ticket –, we anticipate Germany’s CPI headline and core inflation rates to fall more substantially again in September. In this context, we gauge that the above mentioned two effects could have boosted the year-over-year prints between June and August in the order of up to ¾ pp. Specifically, we expect the headline CPI to rise by 0.35% mom, which would result into a considerable drop in the yoy rate to “just” 4.6%. 

Higher yields have contributed to the upward momentum in USD/JPY, pushing the pair above 149.50. With the 150.00 level within reach, it is possible that Japanese authorities may consider verbal interventions or even more significant actions to address the depreciation of the Japanese Yen.

GBP/USD continued its downward trend for the sixth consecutive day, although the pace of decline slowed. The pair reached a low of 1.2110 before rebounding to 1.2140.

Despite the risk aversion seen in the market, the USD/CHF continued to rise and surpassed the 0.9200 level. On the daily chart, the Relative Strength Index (RSI) is at 85.50, a record level.

The Australian Dollar (AUD) was negatively impacted by risk-off sentiment. The AUD/USD pair broke below the 0.6355 level and continues to face downward pressure as long as it remains below that level. The pair recorded its lowest closing price since November. On Thursday, Australia is expected to report a 0.3% increase in Retail Sales for August.

Similarly, the New Zealand Dollar (NZD) experienced a second consecutive day of decline against the US Dollar, but NZD/USD managed to stay above the 0.5900 level. On Thursday, the New Zealand ANZ Business Confidence survey will be released.

The Canadian Dollar (CAD) outperformed other major currencies, resulting in a modest decline in USD/CAD to 1.3500. The rally in crude oil prices supported the Loonie. The price of WTI crude oil surged by 3.50%, surpassing $93.50.

In contrast, the price of Gold dropped below $1,900 and tumbled to $1,872, reaching its lowest level since March. Silver experienced a decline of 1.25%, falling to $22.40; eyes turn to monthly lows and the medium term support around $22.00.