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Dow Jones, US Dollar, Gold, USD/JPY, GBP/USD, FOMC, BoJ, BoE, SNB:Market Forecast

The US dollar has risen in recent weeks as market sentiment has gotten worse, while equity indexes and other risky assets have fallen. A higher-than-expected reading for the consumer price index for August caused market-based FOMC bets to soar, and a rate increase of 100 basis points is now expected with a 1-in-5 chance. The Dow Jones Industrial Average fell 4.13% while the high-beta Nasdaq-100 Index fell 5.77%. Treasuries' yields rose. It rose by 31 basis points to its highest level since October 2007 for the policy-sensitive 2-year rate.

Global market sentiment was negatively impacted by the stronger USD and higher US yields. Japan's Nikkei 225, Australia's ASX 200, and Hong Kong's Hang Seng Index all experienced losses of 2.25%, 2.29%, and 3.10%, respectively. The DAX in Germany dropped 1.66%, and the Euro Stoxx 50 Index dropped 1.96%. As EU gas storage levels increased to 84.71% full as of September 14, European natural gas prices decreased by more than 9%. The bloc's supply has been strengthened in advance of the winter thanks to an increase in LNG shipments from China. 

Despite the fact that Australia's August jobs report showed a recovery from July and increased expectations of a rate hike at the Reserve Bank of Australia's October meeting, the Australian Dollar dropped close to 2% against the US dollar. NZD/USD dropped below the 0.6 threshold. The second quarter GDP growth rate for the island nation increased by 1.7% from the first quarter. The Bank of Japan's rate decision is important for APAC, but traders don't anticipate a change in the bank's stance despite the Japanese Yen's continued proximity to the 144 mark. Following last week's rate check, which was seen as a possible precursor to intervention, Governor Kuroda is likely to make a statement regarding the exchange rate.

In order to reveal early 2020 levels, the price of gold overshot the critical 1,700 level. The price of yellow metal recovered some of its losses on Friday, but this may have been the start of another leg down. Increasing real yields are a major barrier for precious metals. The price of silver, however, managed to rise for a second week in a row. The gold/silver ratio as a result fell to its lowest point since June. Non-commercial short positions decreased, as indicated by the CFTC's COT report, which likely increased the metal's price.

The cost of crude oil dropped for a third consecutive week. A stronger US dollar, growing bets that central banks would raise interest rates, and China's ongoing COVID lockdowns all hurt the commodity. During the week ending September 9, oil stocks rose by 2.44 million barrels, according to the US Energy Information Administration (EIA). Traders were alarmed by FedEx's pessimistic outlook; the delivery company predicted a global slowdown and cited weakness in Europe and Asia as reasons.

In Europe, two significant central bank decisions are anticipated this week. An increase in the SNB rate of 75 basis points could be beneficial for the CHF. The Swiss Franc reached its highest price since January 2015 when compared to the Euro. The British pound reached a new, decades-low value in relation to the dollar. According to overnight index swaps, the Bank of England is expected to increase rates by 50 basis points on Thursday, but the weaker pound and rising FOMC bets could lead to a surprise 75-bps increase. Monday is a bank holiday in the United Kingdom.

This week in Europe, two important central bank decisions are anticipated. The CHF might benefit from a 75 basis point increase in the SNB rate. When compared to the Euro, the Swiss Franc hit its highest value since January 2015. The value of the British pound in relation to the dollar hit a new, decades-low level. The Bank of England is anticipated to raise rates by 50 basis points on Thursday, according to overnight index swaps, but the weaker pound and rising FOMC bets could result in a surprise 75-bps increase. The UK observes a bank holiday on Monday.

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