USD falls back as precious metals rally; Stocks lower

Summary:

• USD falls back and precious metals rally on Dovish Fed talk

• US markets lower and set for weekly loss

• Stock of the week: Lockheed Martin

• Oil: Will Opec help prices recover?

• Crypto: Central banks eye CBDCs

There’s been a sizable pullback in the US dollar in recent trade as precious metals and bonds have spike higher in what looks like a broad dovish reaction to some Fed speak. Comments from members Kaplan and Clarida both hit the wires in the last hour and these remarks preceded these moves in the markets. While these comments may not seem strongly dovish they are a bit surprisingly so and given the market reaction it appears to have caught some off guard. There’s been a clear fall lower in the greenback following this with the EURUSD moving up to its highest level of the week and reclaiming the 1.14 handle.

There’s been an attempted move higher seen in US stock markets this afternoon but this faded out by the European close with the major indices slipping back into the red. The rally could’ve been helped in part by the earlier Fed comments which saw the USD fall back and precious metals spike higher but as of yet, equities haven’t taken out recent highs. The US500 in particular has been playing fib levels quite nicely this week and the market is once more back around the 38.2% at 2736. An attempt to break below the 61.8% at 2685 yesterday evening led to buyers stepping in and these regions now provide possible resistance and support zones.

There is no doubt that the defense is the major point of interest of the US authorities. To back words with facts let’s just say that Lockheed Martin Corp (LMT.US), the major US aircraft manufacturer, held the top position on the list of the 100 biggest federal contractors in each of the past 5 years. The company may be set to reinforce its presence at the top of the list as the US officials hinted that another stunning deal is coming soon.

OPEC cartel and associated countries decided to rise production in mid-2018 due to concerns over the deficit on the market. Despite huge increase in the US production global oil stockpiles kept dropping on the back of issues in Venezuela, Nigeria or Libya. This combined with the US withdrawal from the Iranian nuclear accord led to substantial backwardation on the oil market (futures price below spot price) and insane rally. Nevertheless, what oil bulls are mostly concerned about is the next OPEC move. Oil prices dropped around 25% from 2018 high. The cartel must act rapidly if it wants to prevent further declines.

Recent days have brought quite interesting moves n the cryptocurrency market. BitcoinCash (BITCOINCASH on xStation5) hard fork frightened investors, and the whole market experienced huge declines. Even Bitcoin (BITCOIN on xStation5) did not resist the downward pressure and it dropped around 10% over a single day. Today’s overview seems to be somewhat less pessimistic as major cryptocurrencies (excluding BitcoinCash) appear to have settled down after recent drops. A capitalization of the whole market stands around $185B. The central banks of Canada, England and Singapore suggested a report that central bank digital currencies (CBDCs) may be useful as a solution for problems related to cross-border payments. The central banks said that CBDCs offer some advantages such as 24-hour availability and anonymity. Let us recall that more and more countries have thought over an implementation of state-run cryptocurrencies recently.