Mohicans markets：​Follow Eurozone Central Bank Developments

South Korea-Seoul Stock Exchange is closed for one day. China-Taiwan Stock Exchange is closed for one day due to the Mid-Autumn Festival holiday. China-Shanghai Futures Exchange, Dalian Commodity Exchange(DCE), Zhengzhou Commodity Exchange(CZCE)and Shanghai Gold Exchange (SGE) will not conduct night trading.

At 15:00, the EU finance ministers and central bankers meet to discuss a number of issues, including inflation, perhaps hinting at the magnitude of the ECB's rate hike after its September meeting. 

At16:30, the Bank of England releases its survey on the extent of inflation. Citi expects the U.K. inflation could peak at 11.7% in January next year and as high as 17.4% in the absence of an energy intervention program. 

At 22:00, the Chicago Fed President Evans speaks, and expected to continue to solidify hawkish market expectations for the Feds policy path. 

TBD The Czech Presidency of the EU has called an extraordinary meeting of energy ministers to discuss an overall intra-regional solution to the spike in the electricity market. Czech Industry and Trade Minister Sikela said on Monday that the European energy market has come to a halt and we have to solve this problem. Czech officials have proposed limiting the price of natural gas for power generation.

Global Views - List of Major Markets

On Thursday, September 8, spot gold rose and then fell, backed below the $ 1710 mark, and finally closed up 0.53%, at $ 1708.59 per ounce; spot silver rallied and fell, and finally closed down 0.51%, at $ 18.42 per ounce. Affected by the European Central Bank's sharp interest rate hike in September and hawkish comments from ECB President Christine Lagarde, the dollar index test 110 resistance unsuccessful, after retracting most of the day's gains, finally closing up 0.073% at 109.67; ten-year U.S. bond yields back to 3.3%, two-year U.S. bond yields again on the high side of 3.5%.

In terms of crude oil, WTI crude oil oscillated upward, narrowing gains after the release of the surging EIA crude oil inventory data, eventually closing up 1.32% at $82.72 per barrel; Brent crude oil eventually closed up 0.84% at $88.42 per barrel. U.S. stocks closed with the S&P 500 closing up 0.66%, the Nasdaq closed up 0.6% and the Dow closed up 0.61%. Lithium battery, social media, banks and other sectors were the top gainers, and popular Chinese stocks were generally down. The beeper sharply closed down more than 15% after the performance.  

Most European stocks closed up, Germany's DAX index closing down 0.09%, the FTSE 100 index closing up 0.33%, France's CAC index closing up 0.33%, Spain's IBEX35 index closing up 0.78%, Italy's FTSE index closing up 0.88%, and the European Stoxx 50 index closing up 0.29%.

Precious Metals

In the morning session on Friday, September 9, Beijing time, spot gold rebounded from last night's lows and is currently trading near $1,714.09 per ounce. The Federal Reserve officials spoke last night, Powell said that decisive and strong action is needed on inflation and to keep moving forward until the task of fighting inflation is completed. The Fed's Brown Book showed that the U.S. economic growth was weak and inflationary pressures continued at least through the end of the year. In this background of weak economic data, but the Federal Reserve officials remain hawkish unchanged, which will continue to suppress gold prices in the short term.

According to the World Gold Council data, gold prices fell 2% in August as rising U.S. bond yields and a stronger dollar continued to put pressure on gold; global gold ETFs saw net outflows of 5.1 tons ($2.9 billion) in August, which is in line with gold price performance, and is the fourth consecutive month of outflows. Net positions in gold management funds turned positive in September, while global gold ETF outflows were lower than in July.

This is the biggest negative for gold as the global central bank rate hike cycle begins. We have hinted more than once that a change in monetary policy is the key to gold's bull-bear shift.

1.The Fed's job is to ensure that inflation is expected to anchor at 2%, and is ready to adjust the scale of tapering according to economic needs. The Fed's “Eagle King” Bullard, Chicago Fed Evans also said that inflation down to 2% is the Fed's primary goal. Evans believes that the Fed is likely to raise interest rates in September by 75 basis points.

2.The United States to the week of September 3, the initial jobless claims recorded 222,000, which is a new low since the week of May 28, 2022. Expecting to be 240,000, the previous value of 232,000.

3.The European Central Bank raised all three major interest rates by 75 basis points, which was in line with market expectations, and was the first significant 75 basis point rate hike in 1999. The ECB raised inflation expectations across the board and is expected to raise rates further to curb demand. The ECB President Lagarde said at the conference that inflation risks are expected to be on the upside and the number of future rate hikes will not exceed five, stressing that 75 basis points is not the norm; Lagarde said she does not know what the terminal rate is, but will raise it if necessary.

Crude Oil

In early trading on Friday September 9, Beijing time, U.S. oil traded at $83.23 per barrel; Oil prices rose more than 1 percent on Thursday as some technical traders bought the dip and Russia threatened to halt oil and gas exports to some buyers. In addition, the Biden administration is considering whether to further release crude oil reserves to limit the rise in oil prices.

In the days, the focus will be on the final monthly rate of wholesale inventories in the United States in July. At 00:00 on Saturday, Federal Reserve Governor Waller delivers a speech on the US economic outlook, and Fed George delivers a speech on the US economic outlook.

Bullish factors affecting oil prices

[Investors digest the Fed's hawkish speech, US stocks rise]

[Russia will take countermeasures against EU restrictions on entry of Russian citizens]

[Biden discusses Russia-Ukraine conflict with allies and emphasizes continued assistance to Ukraine]

Bearish factors affecting oil prices

[New British Prime Minister unveils plan to ease energy shock]

[U.S. Deputy Treasury Secretary says other countries are considering joining G7 Russia's oil price cap plan]

[The Biden team is weighing whether to release additional strategic oil reserves]

[U.S. crude oil inventories unexpectedly soared by nearly 9 million barrels]

Overall, oil prices were boosted by Russia's threat to stop exporting oil and gas to some buyers. However, with the increase in inventories, the Biden administration is considering whether to further release crude oil reserves. And the European oil price cap on Russia will be discussed on Friday. Short-term gains in oil prices may be limited, and market uncertainty risks will increase. With the weekend approaching, it is necessary to pay careful attention to relevant news.

Foreign Exchange

In early trading on Friday September 9, Beijing time, the US dollar index fell slightly and is currently trading around 109.13. The U.S. dollar rose against the yen after Fed Chairman Powell reiterated that the U.S. central bank would continue to raise interest rates to curb soaring inflation and warned that monetary policy cannot be eased prematurely. Sterling was under pressure after the death of Queen Elizabeth on Thursday and the chance that the Bank of England would raise interest rates by 75 basis points next week fell below 50%.

USD/JPY has been the most sensitive pair to U.S. rate expectations over the past few months. The exchange rate hit a 24-year high of 144.99 on Tuesday, and then fluctuated at a high level. It closed down 0.17% on Thursday at 143.84.

The European Central Bank raised interest rates by an unprecedented 75 basis points on Thursday, pushing the deposit rate above 0% for the first time since 2012. EUR/USD initially rose above parity, but then turned weaker as Powell spoke.

The U.S. interest rate futures market sees an 87% chance the Fed will raise rates by 75 basis points at this month's meeting, which would push the federal funds rate to a range of 3.0%-3.25%.

The dollar index, which hit 110.80 on Wednesday, its highest since June 2002, closed up 0.08 percent at 109.65 on Thursday.

EUR/USD closed down 0.07% at 0.9998 on Thursday. The ECB said it expected to continue raising interest rates to curb demand, with fighting inflation a top priority. 

The yen has been particularly hit by the recent strength in the dollar, as the Bank of Japan remains the only dovish central bank.

Sterling fell against the dollar on Thursday. Earlier, Queen Elizabeth passed away. Queen Elizabeth is Britain's longest-reigning monarch and has represented the country's national image for 70 years. Sterling closed down 0.29% at $1.1501 on Thursday. In addition, the probability of the Bank of England raising interest rates by 75 basis points next week fell below 50%, also weighing on the pound.

Big things to watch on Friday: Bank of England's inflation survey, ECB President Christine Lagarde's speech, Chicago Fed's Evans' speech on the economy.

Institutional Currency Viewpoint

1. Wells Fargo: EUR/USD could fall further in the near term

2. Wells Fargo: Weak Aussie dollar to last until end of 2022 

3. After the ECB interest rate decision, Goldman Sachs recommends shorting the euro against the Swiss franc

4. Commerzbank: The yen is almost hopeless to recover in the short term

Statement | Disclaimer

Disclaimer: The information contained in this material is for general advice only. It does not take into account your investment goals, financial situation or special needs. Mohicans Markets has made every effort to ensure the accuracy of the information as of the date of publication. Mohicans Markets makes no warranties or representations regarding this material. The examples in this material are for illustration only. To the extent permitted by law, Mohicans Markets and its employees shall not be liable for any loss or damage arising in any way, including negligence, from any information provided or omitted from this material.The features of Mohicans Markets products, including applicable fees and charges, are outlined in the product disclosure statements available on the Mohicans Markets website and should be considered before deciding to deal with these products. Derivatives can be risky and losses can exceed your initial payment. Mohicans Markets recommends that you seek independent advice.

Mohicans Markets, (Abbreviation: MHMarkets or MHM, Chinese name: Mai hui), Australian Financial Services License No. 001296777.