Market News

KCM Trade’s Tim Waterer: Risk Appetite in Short Supply on Lack of Progress from Washington

May 24, 2023

Asian markets were in no mood to advance today, given theweak Wall Street lead and the unresolved debt-ceiling dramas. With riskappetite in short supply, major bourses moved lower due to the lack of progressfrom Washington. While the expectation is that a deal will get done, withneither side willing to cede ground until the very last minute, market nervesare being tested which is why we are seeing a reluctance by investors to takeon risk-assets.

In a delightful twist, the Saudi energy minister stepped into provide a boost to the oil market. With his punchy remarks, he warned allthose betting on the oil price falling to "watch out!" The oil pricecouldn't resist the excitement and had a joyous upswing. However, this effectmight wear off if OPEC+ doesn't take any new concrete action to manage thesupply. Nevertheless, for now, these comments have become the life of theparty, propping up the oil price. It's a mystery whether the short sellers willcall the minister's bluff or join the dancing crowd.

Meanwhile, the USD is keeping the beat thanks to livelycomments from Fed officials about the outlook for US interest rates. They havebeen singing a chorus of aggressive interest rate stances, which made themarket scale back its expectations of softer rates by year-end. Interestingly,the Fed Chairman Jerome Powell seems to have a different tune, soundingdecidedly dovish. But overall, the Fed officials have been dancing ahead withtheir rates, leading to higher treasury yields and a lively USD.

Unfortunately, the potential for gold to shine bright ishindered by the strong US Dollar, keeping the price contained between supportand resistance zones. It's like a thrilling game of tug-of-war with support at$1960 and resistance at $1985. As long as Fed officials show no signs ofloosening monetary policy, the greenback keeps its strength and hampers thegold price. In the short term, if US macro indicators justify the Fed's hawkishstance, it will put pressure on gold, but who knows what tricks the futureholds!

The NZD decided to take a daring dive today after the RBNZdeclared that they're done with rate hikes. They did their expected 25bp lift,reaching 5.5% and then announced that they've reached the terminal rate,causing the Kiwi Dollar to do a spectacular nosedive. The NZDUSD rate couldn'tresist the excitement and fell over half a cent upon hearing the news.

Looking ahead, markets are eagerly awaiting the FOMC meetingminutes to see if the internal discussions match the hawkish tone heard fromthe dancing Fed members last week. And of course, any news from Washingtonregarding the latest on the debt ceiling could add some extra sparkle andexcitement to the financial markets in the coming days.


Other Post