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Trading financial products on margin carries a high degree of risk and is not suitable for all investors. Please ensure you fully understand the risks and take appropriate care to manage your risk.

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Market Insights

US Dollar strengthens with Evergrande's default pressurising stocks

US Dollar strengthens with Evergrande's default pressurising stocks

Evergrande, USD, Oil Price Outlook:

  • China Evergrande Group defaults on 4 billion yuan bond,
  • Oil prices pull back, pushing WTI and Brent crude lower
  • Rising Treasury yields and USD strength continue to weigh on major currency pairs and global stock indices

Evergrande default adds to gloomy outlook

Investors' appetite for risk has continued to sour after property giant Evergrande defaulted on a $547 million (4 billion Yuan) bond payment. With China’s second largest property developer filing for bankruptcy protection in the US last month, its financial woes have worsened after missing payments due yesterday, 25 September 2023.

The embattled real-estate market in the world’s second largest economy has played a critical role in driving expectations for the global economic outlook, raising the risks of a recession.

As stocks and commodities remain vulnerable to changes in the geopolitical backdrop, oil prices have suffered a mild setback, driving WTI crude back below $90.00.

Crude oil price action

With prices of WTI moving closer toward the 20 - day MA support at a level of 88.29, the RSI has continued to move lower, a potential indication that oil bulls may be losing steam.

WTI crude oil daily chart

WTI Daily chart

Chart prepared on TradingView

Rising US treasury yields support USD strength

For the safe-haven dollar, prospects of higher interest rates for longer have been supportive of rising treasury yields, which have recently hit their highest levels in 16 years.

Although USD strength has recently driven EUR/USD back to key technical support at the psychological level of 1.060, GBP/USD has fallen below 1.220, driving the RSI further into oversold territory.

GBP/USD daily chart

GBPUSD daily chart

Chart prepared on TradingView

Factors to watch

For the remainder of the day, the release of economic data includes:

  • US house price index MoM (Jul) - 13:00 UTC
  • US consumer confidence (Sep) - 14:00 UTC
  • US new home sales (Aug) - 14:00 UTC

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Not investment advice. Past performance does not guarantee or predict future performance.