The USD weakened yesterday as oil prices dropped and market worries about the Iran conflict eased. Are we at the starting point of negotiations? While optimism sparked brief gains in US equities, uncertainty around the Fed’s monetary policy and ongoing geopolitical tensions continues to drive volatility across FX and commodities markets.
USD weakens in the FX market
The USD lost ground yesterday as the post of US President Trump for a suspension of US airstrikes for five days may have eased market worries for the war in the on the rise on Friday and during today’s Asian session. The developments tended to ease the market worries which may have allowed for some outflows from the USD. Yet the main factor that may have weakened the greenback may have been the drop of oil prices which may have eased market worries for the Fed maintaining a tight monetary policy.
Xcellence Research Team opinion
Should we see the war in Iran de-escalating and oil prices dropping we may see the USD losing some ground, while on the flip side a possible escalation of the war could provide renewed support for the USD. Also should we see market expectations for the Fed to keep a tight monetary policy intensify we may see the USD getting some support.
Oil prices drop as market worries for the war ease
US President Trump’s post yesterday stated that negotiations were ongoing and productive, foreshadowing a possible deal and that a five day pause in military strikes against Iranian power plants would take place. Yet the Iranians denied that any negotiations were taking place and generally tended to maintain a hard position. Yet reports insist that the Iranians may be open to negotiations despite exchanging strikes with Israel and the hard talk. For today, the market does not seem to be convince for a possible resolution of the conflict as oil prices started to rise again.
Xlence Research Team opinion
Should we see the negotiation efforts falling through and an escalation of the war in Iran, we may see oil prices gaining substantially. On the flip side, should we see the diplomatic approach being enhanced, we may see oil prices being n the retreat.
US equities rise on optimism
US equities were on the rise yesterday after US President Trump’s post. The post practically increased the market’s optimism for a possible resolution of the conflict allowing for a more risk-on approach to emerge. Despite the rise of the three main US stock market indexes, Dow Jones, Nasdaq and S&P 500, we still remain bearish and view the rise as a correction for the time being.
Xlence Research Team opinion
Should market worries ease further we may see US equities rising even more as the market’s risk appetite may improve even further. On the flip side, an intensification of the market worries could allow for a more cautious approach by market participants and weigh on US equities.
Market seems to remain bearish for Gold
Despite gold’s price tumbling yesterday before the American session, US President Trump’s post reversed the losses, almost all. The drop of oil prices tended to ease market worries for inflationary pressures and a subsequent hawkish stance of the Fed thus allowing gold’s price to gain. Yet the market remains highly uncertain for the developments in the war in Iran which allowed for gold’s price to edge lower in today’s Asian and European session. We expect high volatility for gold’s price to be maintained and continue to view the market’s expectations for the Fed’s stance as the main issue fundamentally puzzling gold’s price at the current stage.
Xlence Research Team opinion
Overall, we still see the case for the war in Iran to continue which could possibly lead to further escalation and thus weigh on gold’s price, as the expectations for inflationary pressures and a tioght monetary policy by the Fed may be enhanced.
Disclaimer: This information is not considered investment advice or an investment recommendation, but instead a marketing communication.
