Commodities Plunge as Dollar Soars
06 July 2022
Another risk-averse wave hit the markets on Tuesday, sending EU stocks into deep losses while US yields and the US dollar advanced, along with US stocks.
Investors are now pricing in rate cuts in the US as soon as the first quarter of 2023 as fears of a global recession have hit new highs.
EU collapses, so does the euro
German Economy Minister Robert Habeck stated that the financial markets might be negatively impacted by the crisis in the energy sector. However, he left open the possibility of adjusting gas prices. Since Russia reduced its gas exports to the nation, Germany is concerned about a total loss of Moscow's supply since, on July 11, Russia will temporarily shut down the NordStream-1 pipeline for routine maintenance.
He has also warned that this could lead to a Lehman Brothers event as many companies and whole industries will likely collapse without the Russian gas.
Investors have started to price in a collapse of the German economy, sending the EURUSD pair to 20-year lows below the 1.03 level. One needs to ask, what is the euro without Germany?
Political issues in UK
Elsewhere, the GBPUSD pair fell below the 1.20 level for the first time in more than 2-years amid soaring USD and fresh political issues in the UK. First, two prominent cabinet ministers, Sajid Javid and Rishi Sunak, resigned. They were swiftly followed by Bim Afolami, vice-chair of the UK Conservative Party, Saqib Bhatti, and the parliamentary private secretary of State for N. Ireland, Jonathan Gullis.
The surging US dollar undermined commodities, sending them to multi-month lows - silver plunged to 19 USD, gold fell to 1,765 USD, copper declined to 3.40 USD, and WTI oil cratered more than 10 USD to stabilize around 100 USD.