After months of speculation and preparation, we’re finally here at the first US rate hike in several years. This could be the straw that breaks the markets back and we shall see the repercussions of raising rates in a very fragile economic environment. If energy markets continue to disintegrate on increased supply and diminishing demand, inflation will come down quickly. Add in building commercial inventory and weak consumer spending and sentiment and we could be on for an event.
The major global indices today would not be shaken by even a tsunami hitting Japan. US markets are doing well ahead of the FOMC, with the Nasdaq at the time of writing gaining 2.75 % to reach levels seen at the start of last week. Similarly, the UK FTSE100 ended the London session higher with a 1.70% gain.
Boris Johnson, the British prime minister, met with Saudi Arabian and Emirati leaders today to secure more oil as the West faces high energy prices because of the Russia-Ukraine conflict. Oil has heavily been on the news headlines today with different agencies publishing reports on the current demand and usage of oil products.
In addition to discussing global security, the leaders also discussed energy shortages around the world. As a result of Russia's unprovoked attack on Ukraine, the Prime Minister expressed his deep concern and stressed the importance of working together to improve market stability in the global energy sector, a Downing Street spokesperson said. As the West imposes more sanctions on Russian products and markets due to the conflict in Ukraine, PM Johnson is seeking ways to reduce dependency on Russian exports.
The US Energy Information Administration report stated that crude oil stocks in the US rose by 4.3 million barrels to 415.9 million barrels in the week ending March 11. Though, total commercial petroleum inventories were down by 3.6 million barrels.
According to the International Energy Agency (IEA), rising commodity prices and sanctions against Russia are expected to slow global economic growth significantly. Based on the latest report the IEA revised its projection of global oil demand lower by 1.3 million barrels per day between 2Q22 and 4Q22, forecasting total demand to reach 99.7 million barrels per day in 2022, an increase of 2.1 million barrels per day compared with 2021.
Brent continues to test lower back towards the mean and could be about to take out the significant swing low and daily support.
Retail sentiment as shown on the ActivTrader platform is very crowded in the buying camp. These traders are very likely to get stopped out as leaders around the world circumvent the Russian energy sanctions and find more oil within known spare capacity.
Other scheduled news included US retail sales and Canadian CPI.
Retail and food services sales in the United States observed a monthly increase of 0.3% in February to come in at $658.1 billion, slightly below the analysts' forecasts, the country's Census Bureau stated in its report published on Wednesday. The figure was 17.6% higher compared to the same period a year ago.
Canadian CPI m/m came in slightly better than the expected 0.9% at 1.0%. This also pushed the annual rate up to 5.7% and the highest inflation rate since 1991.
The USDCAD set up a lovely slingshot trade set up with a sweep of the double bottom as highlighted this morning before the CAD CPI came out. There is also a chance now that the 1.2515 comes into play as the retracement into 1.27410 was rejected and prices began moving faster to the downside. The Stop Loss is above the previous swing high as I wouldn’t want to presume anything about this pair. I am just speculating that there is a negative reaction to the FOMC as retail traders and algos sell the news.