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DXY and gold steady, risk assets lifted as mood improves

By Piero Cingari

11:00, 18 February 2022

US-Russian chess game
DXY and gold hold steady, risk assets lifted as mood improves – Photo: Shutterstock

The broad US dollar (DXY) held steady and the safe haven gold edged marginally lower in the European morning session, while investor sentiment in equities, high-beta currencies and crypto improved slightly after Russian and US officials agreed last night to meet in Europe next week, alleviating fears of an impending invasion in Ukraine.

The situation on Russia’s border with Ukraine, however, remains quite tense, with Ukrainian news sources (Kyiv Independent and Interfax) reporting incidents and rising violations of the ceasefire regime in the Donbas region.

Last night, St Louis Federal Reserve chair James Bullard reaffirmed his hawkish remarks on monetary policy. He urged that the Fed should begin unwinding its balance sheet in the coming months, and that it should deliver 100 basis-point hikes by July. He also said that if inflation does not subside, interest rates should eventually be raised above the Fed’s neutral rate (2%).

On the data front, UK retail sales increased by 1.9% month-on-month in January 2022, above the consensus estimate of 1%, indicating solid consumer demand last month. Looking ahead, markets will continue to pay careful attention to geopolitical headlines.

During the European afternoon, traders await the opinions of several important Federal Reserve officials (Charles Evans, Christopher Waller, John Williams and Lael Brainard) who will participate in the 2022 US Monetary Policy Forum.

Cross assets performance today

In the forex market, major pairs are relatively quiet today, with EUR/USD and GBP/USD flat. Safe havens the Japanese yen (JPY) and Swiss franc (CHF) eased 0.2% and 0.1% against the dollar. The US dollar index (DXY) is hovering flat at 95.80 levels by 11:45 UTC. 

GBP/USD

1.27 Price
+0.240% 1D Chg, %
Long position overnight fee -0.0046%
Short position overnight fee -0.0036%
Overnight fee time 21:00 (UTC)
Spread 0.00036

AUD/USD

0.67 Price
+0.240% 1D Chg, %
Long position overnight fee -0.0065%
Short position overnight fee -0.0017%
Overnight fee time 21:00 (UTC)
Spread 0.00018

AUD/USD_zero

0.67 Price
+0.240% 1D Chg, %
Long position overnight fee -0.0065%
Short position overnight fee -0.0017%
Overnight fee time 21:00 (UTC)
Spread 0.00018

EUR/USD

1.09 Price
+0.030% 1D Chg, %
Long position overnight fee -0.0080%
Short position overnight fee -0.0002%
Overnight fee time 21:00 (UTC)
Spread 0.00006

The high-beta Australian (AUD) and New Zealand dollars (NZD) are the best performers in the G-10 space, up 0.3% and 0.4% against the US dollar respectively. Oil-linked currencies, such as the Canadian dollar (CAD) and the Norwegian krone (NOK), saw no gains as crude prices dropped.

Among commodities, Brent and WTI oil plunged by 2% as worries over supply disruptions from a Russia-Ukraine conflict eased. The European natural gas benchmark (Dutch TTF) continued to trend lower, while US Henry Hub natural gas is down by 1%.

Metals erased some of the previous session’s gains, with gold hovering around $1,900 per ounce (-0.4%) and palladium falling by 1.1%. Meanwhile, copper, alluminium and nickel extended their gains, increasing by 0.8%, 0.4%, and 0.3%, respectively.

The UK’s FTSE 100 and German DAX are both marginally up 0.3%. The S&P 500 futures are also slightly higher.

A 7.7% drop yesterday sent bitcoin to test support in the $40,000-$40,500 region. The most popular cryptocurrency is down 0.8% in London midday trading today.

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Chart of the day: Gold excelled, while bitcoin lagged this week

Chart showing bitcoin underperformance in the past 24 hoursBitcoin underperformed major asset classes in the last 24 hours – Credit: Capital.com

Performance matrix of major currencies – 18 February 2022

A forex table that compares nine major currencies against each other, including USD, EUR, GBY, JPY, CHF, AUD, NZD, CAD and NOKPerformance matrix of major currencies as of 18 February 2022, 11:45 UTC – Credit: Capital.com

Forex performance heatmap – 18 February 2022

A forex table showing the performance of US dollar and the euro against other currenciesForex performance heatmap as of 18 February 2022, 11:45 UTC – Credit: Capital.com

US dollar today

  • The US Dollar Index (DXY) was at 95.80 at the time of writing, flat on the day.
  • During a panel at University of Columbia, St Louis Federal Reserve chair James Bullard warned about increasing inflationary risks if the Federal Reserve doesn't act quickly. “We’re at more risk now than we’ve been in a generation that this could get out of control,” he said. 

    Bullard argued that the Fed should start reducing its balance sheet in the second half of this year, and provide 100 basis-point rises by July. Additionally, he suggested that if inflation persists, interest rates should ultimately be hiked beyond the Federal Reserve’s neutral rate (2% ).

  • Despite Bullard’s hawkish remarks, Fed futures prices indicate that market assigns a 32% chance, down from 50% a week ago, of a 50-basis-point (bps) hike in March. Traders are currently pricing in a 33 basis-point increase, down from almost 40bps earlier this week, according to the latest CME Group FedWatch tool.

  • Rising demand for US Treasuries lead to softer yields in the long-end of the curve. The yield on two-year notes remained steady at 1.5%, while yields on the 10-year maturity notes edged down below 2%.

US dollar (DXY) technical levels

  • 52-week high: 97.38
  • 52-week low: 89.49
  • 50-day moving average (one-day chart): 95.94
  • 200-day moving average (one-day chart): 93.67
  • 14-day relative strength index (RSI) (one-day chart): 49

Markets in this article

AUD/USD
AUD/USD
0.66943 USD
0.00161 +0.240%
Oil - Brent
Brent Oil
83.771 USD
0.563 +0.680%
BTC/USD
Bitcoin / USD
67213.35 USD
154.75 +0.230%
Copper
Copper
5.04976 USD
0.19894 +4.100%
EUR/USD
EUR/USD
1.08691 USD
0.00028 +0.030%

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Related reading

The difference between trading assets and CFDs
The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional trading, you buy the assets for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks, for example.
CFDs attract overnight costs to hold the trades (unless you use 1-1 leverage), which makes them more suited to short-term trading opportunities. Stocks and commodities are more normally bought and held for longer. You might also pay a broker commission or fees when buying and selling assets direct and you’d need somewhere to store them safely.
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