The risk-on mood is dampened overnight after Monday’s decent run of appetite. The S&P 500 has dropped over 1% in the last 12 hours. On the other hand, treasury yield and the dollar rebounded. The DXY is back above the 94 key level thus pressuring commodities. Gold is back at 1750 to continue the sideways range in October so far after the massive bullish breakout in late September.

Oil jumps to multi-year high

Oil is stealing the spotlight this week. After the OPEC+ committee agreed to proceed with its plan to hike output by 400 BPD in November. The commodity surged above the $77 peak to reach the highest price since November 2014. WTI has entered into the $80 region making the black Gold the most volatile this week so far.

RBNZ hikes interest rate

RBNZ met market expectations overnight as it officially announced a 100% rate hike from 0.25% to 0.5%. The New Zealand central bank leads the way among the major banks as it continues to push for monetary tightening. On Monday, the RBA took a cautious stance – leaving rates unchanged at 0.1%. After the RBNZ announcement, NZDUSD quickly spiked to 0.6980 before losing all as the market came just as expected while a rising dollar pressures the pair toward the 0.69 psychological level. Traders should therefore focus on the dollar and the general risk sentiment which is currently regressing ahead of the London market.

Upcoming market events

As the dollar stages a recovery with the return of the risk-off sentiment, traders will have the ADP Non-Farm Employment Change report to look forward to. Better than expected data with a big deviation will most likely push the dollar index toward retesting the 94.5 key level. Otherwise, very disappointing data should lead to a retreat below the 94 key area. The bigger events come on Friday – Non-Farm Payroll and Unemployment Rate. While these events will be keenly anticipated, the general risk sentiment and investors’ perception of the treasury yield should continue to influence the dollar before the NY session on Friday. Also on Wednesday, last week US Crude Oil inventories data will be released.

FX performance ahead of London opening

Ahead of the London session, the USD leads the way followed by the CAD which was Monday’s leader after a massive rally in the oil prices. The European currencies – CHF, EUR and GBP have been positive as well leaving AUD and NZD as the Asian session laggard while JPY stays sideways despite the risk-off sentiment.

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