Daily Market Update – February 7

US Dollar Rises on Hints of Fed Rate Hike in March

The US Dollar strengthening versus all major currencies after Federal Reserve Bank of Philadelphia President Patrick Harker said that March is on the table for a possible rate hike.

The Dollar Spot Index is trading at 100.65, an intraday gain of 0.83%, with cable standing at $1.23633, down 0.87% and the EUR down 0.74% at $1.0669.

Global Stocks Mixed, European stock markets are moving higher

European stock markets are moving higher, with the FTSE and DAX are outperforming, while Eurozone peripheral markets are little change and the Spanish IBEX is lower. Real estate sector stocks led the broader rise in Europe, while banking shares retreated for a second day as core yields continue to decline. Asian stock markets fluctuated and the Nikkei closed with a -0.35% loss. Hang Seng and CSI also closed in the red, while the ASX 200 managed a modest gain as the RBA kept policy on hold. U.S. stock futures are also moving higher, while oil prices are down from earlier highs and WTI is trading below USD 53 per barrel.

Oil Prices Drop on Strong Dollar

Oil is trading lower shortly before the regular session opening. Tensions over Iran have eased and traders appear to be going back to watching the traditional fundamentals.

Concern over increasing U.S. production has been the major theme pressuring oil prices lately, but now the strengthening U.S. Dollar is also contributing to the weakness in the crude oil market. During the pre-market session, the dollar spiked higher, sending crude tumbling to trade at 52.25 down 1.43% while Brent oil is trading at 55.02 a barrel a decrease of 1.27%.

Gold Holds Steady Above 1230

Gold futures are trading seaty in limited price action shortly before the regular session opening. The inability to take out yesterday’s high at $1237.50 and sellers at a major 50% level at $1235.60 contributed to the selling pressure. The catalyst behind the early weakness was a surge in the U.S. Dollar due to hints of Federal Reserve Bank of Philadelphia President Patrick Harker that said March is on the table for a possible rate hike.

Look for sellers to prevail today if the dollar continues to strength. This strength is not related to U.S. Treasury yields, but to unexpected news about a drop in Chinese foreign reserves.