Euro tries to recoup from five-month trough amid bearish outlook
Euro rose in European trade on Monday against a basket of major rivals amid attempts to recoup from five-month lows against the dollar, with the risk sentiment improving worldwide.
Even as the euro currently improves, the bearish outlook remains as investors expect multiple interest rate cuts by the ECB as inflation approaches the 2% target.
The Price
EUR/USD rose 0.3% to $1.0665, with a session-low at $1.0630, after losing 0.8% on Friday, the third loss in a row, plumbing a five-month trough at $1.0622.
Heavy Weekly Loss
The EUR/USD pair tumbled 1.8% last week, the fourth weekly loss in five weeks, and the largest such weekly loss since September 2022 amid concerns about the interest rate gap between Europe and the US.
The latest ECB’s policy meeting bolstered the odds of an early 0.25% interest rate cut in June, while conversely, strong US inflation data in recent data hurt the odds of such a cut by the Federal Reserve.
Rate Gap
The current US-Eurozone interest rate gap stands at 100 basis points, and could widen to 125 basis points in June.
Positive Sentiment
Positive sentiment is spreading in the markets as the prospects of a full-scale war between Iran and Israel wane.
Iran launched drones and missiles towards Israeli land this week, in response to an alleged Israeli attack on the Iranian consulate in Syria.
Iran said the military response has been done, while US President Joe Biden informed the Israeli government that the US won’t support an Israeli counterattack on Iran.
Downward Outlook
The City Index company said the EUR/USD pair is facing a bearish outlook after piercing major supports such as $1.0795, then $1.0725.
Their analysts now expect the pair to hit $1.06 initially, and then potentially head towards $1.05, and finally to reach October lows at $1.0448.
Wall Street collapses, Dow Jones slides below 38,000
US stock indices fell on Friday as markets assess latest inflation data released this week.
Today, the season of the quarterly earnings results for corporations officially commenced, starting with banks.
Earlier government data showed producer prices rose 0.2% m/m in March, while surging 2.1% y/y.
US unemployment claims fell to 211 thousand last week from 222 thousand, while analysts expected 216 thousand.
Other data showcased the accelerating inflation with consumer prices in March, which hurt the odds of a Fed interest rate cut in June.
US consumer prices rose 3.5% y/y in March, above estimates of 3.4%.
On a monthly basis, consumer prices rose 0.4%, while analysts expected a rise of 0.3%.
On trading, Dow Jones fell 1.2%, or 457 points as of 18:10 GMT to 37,998, while S&P 500 fell 1.4%, or 72 points to 5126, as NASDAQ shed 1.6%, or 263 points to 16,178.
Oil prices return higher on Middle East tensions
Global oil prices rose in European trade on Friday, resuming their advance and approaching six-month highs amid mounting Middle East tensions as Iran vows to respond to a presumed Israeli airstrike on its consulate in Syria.
The tensions overshadowed the dollar’s rise and the large US inventory buildup last week.
Prices
US crude rose 1% to $86.41 a barrel, with a session-low at $85.43, while Brent rose 0.95% to $90.92 a barrel, with a session-low at $90.06.
US crude lost 0.8% on Thursday while Brent shed 0.5%, the fourth loss in five days on profit-taking off six-month highs.
Israel-Iran Tensions
The Wall Street Journal said that Israel is preparing for an Iranian attack in the next two days after its presumed air strike on the Iranian consulate in Syria.
The Israeli government warned that if Iran attacked Israel, the Israeli army would respond with an attack on Iranian territory.
Iran’s supreme leader Khamenei threatened to punish Israel, after accusing it of striking the Iranian consulate in Syria last week, killing 7 military officials.
The mounting Israel-Iran tensions threaten a potential widening of the war between the two sides in the region, which could threaten supplies.
The Dollar
The dollar index rose 0.65% on Friday on track for the fifth straight session, scaling a five-month high at 105.95 against a basket of major rivals.
Recent US inflation data hurt the odds of a Fed interest rate cut in June, in turn boosting the greenback.
US Stocks
The Energy Information Administration reported a sharp increase of 5.8 million barrels in US crude stocks in the week ending April 5, the third such weekly increase in a row, beating estimates of a 0.9 million buildup.
According to the EIA, total commercial stocks rose to 457.5 million barrels, the highest since July 2023, in a negative sign for demand in the US.
US Production
US crude production stayed flat last week at 13.1 million barrels, the lowest since the week ending December 8.
Oil Prices Outlook
Goldman Sachs’ analysts expect Brent to remain below $100 a barrel, provided no new surprising geopolitical hits take place.
Silver trades above $29 for first time in 3 years
Silver prices rose in European trade on Friday on track for the second profit in a row, moving above $29 an ounce for the first time in three days amid strong demand on precious metals due to worsening geopolitical tensions in the Middle East.
The White metal is on track to hit ten-year highs on strong demand from retailers, especially as silver remains far from its true value compared to gold, which recently hit a record high above $2400.
Prices
Silver prices rose 2.8% to $29.23 an ounce, the highest since February 2021, with a session-low at $28.39.
Prices closed up 1.8% yesterday, the fourth profit in five days following weak US producer prices data.
Weekly Trades
Silver is up 6% so far this week, on track for the third weekly profit in a row.
Geopolitical Tensions
The Wall Street Journal said that Israel is preparing for an Iranian attack in the next two days after its presumed air strike on the Iranian consulate in Syria.
The Israeli government warned that if Iran attacked Israel, the Israeli army would respond with an attack on Iranian territory.
Iran’s supreme leader Khamenei threatened to punish Israel, after accusing it of striking the Iranian consulate in Syria last week, killing 7 military officials.
Retailers
As retailers seek assets to guard against potential risks as global central banks change their policies to a more accommodative direction, it’s clear that silver is becoming an excellent under-valued choice.
The recent silver surge tipped off many retailers that silver remains far from its true value compared to gold, which is trading at record highs.
Gold hit a record high of $2400 an ounce on April 12, while silver is very far away from its record high of $49.78 scaled in April 2011, in turn triggering strong demand on the white silver for its potential hidden value.
Historically, silver had usually taken widen movement arcs upside and down compared to gold, however recent times were an exception, with retailers now paying more attention to the missing silver value.
Silver Forecasts
The Silver Institute expects 2024 to be an excellent year for the white metal, with prices potentially hitting 10-year highs.
The Institute expected total global demand to reach 1.2 billion ounces in 2024, the second highest on record.