Dollar Gains Strength Ahead Of Powell's Speech; China Weighs Down On Commodities
It appears that the US Dollar (USD) is gaining strength while the global shares have turned soft ahead of Powell's speech. According to the market's perception, the upcoming speech by Jerome Powell will offer clarity on what's ahead for the US interest rate.
At the same time, the recent economic data from China weighs negatively on the commodities such as copper and oil. As per the recent Chinese data, a significant drop in imports and exports was witnessed, This is an indication that the global economic powerhouse has slowed down!
Raw Material Shipments On Decline
During the last 2 months, the shipments of rat materials coming into China have decreased. This has raised concerns that the Chia is sputtering. Considering how the country is among the largest commodity importers in the world, that's not a good sign.
Other than China, the next focus event is Powell - Depending on what he says, the path ahead for the US interest rates will become clear.
The economic data coming out of the US during the last few weeks is showing signs of resilience. This means that the Fed can continue to raise rates. In addition, the interest rates in the USA can also stay at elevated levels for a long period of time as well.
According to analysts at Saxo Bank, all of these signs are positive for the US Dollar. But on the other hand, it will weigh heavily on the commodity markets as well as the stock markets.
If we look at the Fed member's lineup, most of them are hawkish and are in favor of raising the interest rates in the March meeting. If the message conveyed by the members is similar to Powell, it would mean an increase in the US T-yields and an uptrend in the US Dollar.
If we look back, the 10-year bond yield is now more than doubled during the last 1 year. And just a few days ago, it was hovering around 3.942%!