Risk sentiment sours on the back of geopolitical concerns
Donald Trump’s comments over US military support for Taiwan have raised geopolitical concerns and seen a sell-off in risk-sensitive assets, while the Biden administration’s plan to impose further export restrictions on chip-making equipment to China has raised the prospect of a broader trade war. Tech stocks have been sold off heavily, weakening global equity markets, while EM currencies like the Rand and the Mexican Peso retreated yesterday.
The Rand is currently quoted at 18.19 ahead of this afternoon’s interest rate decision, and the MPC is expected to keep rates on hold once again.
Despite the risk-off mood, the Dollar fell against the other three major currencies on the back of the increasing rate cut hopes and rumours of Bank of Japan intervention. The Yen firmed around 1.4% to 156.16 while the Euro and Pound ended stronger at 1.0937 and 1.3008, respectively.
We could see some volatility in markets today with both the SARB and ECB interest decisions, while in the US, we have the Philadelphia Fed’s manufacturing index number and the weekly jobless claims data.
Rate cut bets keeping Gold on the front foot
The increasing bets of a September rate cut by the Fed are underpinning the price of Gold, with the metal currently sitting at $2,648. Yesterday, Fed Governor Christopher Waller and New York Fed President John Williams hinted at a rate cut sooner rather than later. Platinum and Palladium are trading reasonably flat at just below the $1,000 mark, while Brent crude is trading firmer at $85.50. A drop in US crude inventories provided some support for Brent, but demand concerns are still weighing.