Fawad Razaqzada

US index futures rebounded in the first half of Wednesday’s session, along with European indices ahead of the release of US CPI. Some slightly dovish remarks from the Fed’s Williams seem to have helped sentiment a little, but whether those comments will be backed by data remains to be seen. While slightly hotter than expected inflation data shouldn’t be enough for markets to price in an October Fed hike with more than a coin flip probability, it can nonetheless reinforce expectations of further tightening later in the year.

The EUR/USD forecast hinges on U.S. CPI after five straight weekly losses, with hawkish Fed bets and a fully priced ECB rate hike weighing on the euro.

The USD/JPY eased lower today with the greenback also declining against several other currencies. However, at the time of writing, oil prices were bouncing back and yields were off their lows again. The US dollar hadn’t moved much yet, but these forces could help it to regain its poise ahead of the release of US CPI on Wednesday.

Amid a lack of any major news, the FX markets have been largely in consolidation mode in the first half of Tuesday’s session. The US dollar eased along with bond yields and oil prices, allowing downbeat currencies like the euro to rebound modestly. With US CPI data due for release on Wednesday, don’t expect much in the way of a sharper decline in USD ahead of it. If anything, we could see the dollar buying resume, especially if crude oil prices catch a bid again amid the ongoing situation.

News over the weekend, including continued Houthi strikes in Riyadh has had negative impact on foreign currencies so far, especially those where the economy relies on energy imports. The EUR/USD is particularly vulnerable as lingering concerns over French fiscal policy continue to undermine the euro.

Gold came under renewed pressure in the first half of Monday’s session, alongside weakness across the major FX pairs, especially the EUR/USD. The gold weakness follows a relatively sharp two-day rally at the end of last week, which had raised hopes that the metal may finally have found a floor.

Global indices managed to bounce back towards the end of the week as risk mood improved following Thursday’s drop in bond yields and a slight decline in oil prices. But by late Friday afternoon, oil prices had made back most of Thursday’s drop and the bond markets remained under some pressure as European bourses closed for trading.

Markets went from risk off to risk on yesterday afternoon and we have since kicked on with some follow-up buying of stocks, gold and silver, while the dollar has also shown signs of weakness. Risk appetite turned positive after bond yields and oil prices both retreated yesterday.

The global equity markets remain under pressure and with oil surging higher again this week, we have even more reason to remain cautious. Already, the S&P and Nasdaq were running support from only a handful of hyperscalers and AI stocks. But even these indices have started to take notice of the deteriorating market breadth and global indices. Still, for me, the ongoing weakness is becoming more evident in the Dow and the small-cap Russell 2000 indices, and as such I will continuing watching these markets closely to provide a more accurate signal about the health of the stock markets.