- Gold up ahead of US NFP data
- Cryptocurrencies still under pressure
- Dollar index could move higher
- Oil markets looking more balanced
Gold has bounced back up today and any losses posted during Thursday's sessions are wiped off. However, caution is the word which everyone is focused on today ahead of the mother of all data - the US NFP number. The stronger than expected average hourly earning would confirm that the US labour market is picking up further strength and this could make the dollar stronger. Usually, the relationship between the US dollar and gold is negative however, this relationship does become out of a whack sometimes. A strong US NFP today would provide more confidence for the Fed to increase the interest rate coming in March which may not be as positive for the gold price. Improving consumer sentiment and wage growth would pave the way for higher inflation forecast which would be a combat by the central banks by tighter monetary policy, as US equities further suffer as US Treasury prices take further blows.
The USD ISM Manufacturing data coming in at levels better than expected, and the FED’s hawkish tone were not enough to contain the dollar bears today with the DXY sliding down to 88.6. The dollar’s overnight rally proved short-lived with US 30-year Treasury yields rising above 3%, providing fuel for the Euro to break above $1.25 and cable to increase 0.6%. However, recent data suggests that Investors are gambling on reduced equity volatility in the days ahead, suggesting that the equity market bull run may come to a halt, reducing the dollar sell-off.
The announcement from India’s finance minister that cryptocurrency was not legal tender in the country worsened the crypto market correction with the overall crypto market cap plummeting below $500 billion. Bitcoin dips below $9000. We think that the price could be moving towards the 200-day moving and that would be the real test for the market. Bitcoin below 10K tells you only message which is the upward momentum has died out and the odds are that we would continue to consolidate or grind lower.
Biggest economies of the world are doing well and this supports the demand for oil. Simply put, there is a lot of optimism in the market as the oil market increasingly look more balanced in terms of supply and demand. If the situation continues to improve at this pace, we could see the oil equation improving much quicker than OPEC’s anticipation further. The dollar drop was enough to stimulate another bullish rally for oil with Brent up over 1%, but still remaining shy of last week’s 3-year high.