Strong Dollar Weakens Commodities, Cryptos Lower as Banking Drama Dies Down

 | May 02, 2023 12:49AM ET

  • Poor PMI data from China drive crude demand concerns
  • Gold struggles as yields surge; 10-year Treasury yield rises 14.4 basis points to 3.566%
  • Bitcoin falls 3.8% to $28,200
    • h2 Oil/h2

    The Chinese ISM manufacturing report showed prices paid surged to the highest level since July as steel, copper, plastics, aluminum, and diesel. The economy appears to be weakening at a slower pace, and that should be good news for the crude demand outlook. Crude prices are paring losses on optimism that the economy can strengthen now that banking drama is behind us and on signs factory activity is improving.

    Tensions between the US and Iran will not be easing anytime soon as the Iranian Navy intercepted an oil tanker that was headed for the US. Energy traders are not expecting wide-scale disruptions with the transportation of crude from that part of the world, but if we see a couple more ships seized, it might start to move markets.

    Oil remains heavy as crude demand concerns remain and as the dollar stages a comeback.

    h2 Gold/h2

    Gold prices are lower as US banking drama, one of the big market risks, appears to be off the table. Treasury yields are surging and that is bad news for bullion. ​ Wall Street can now focus on inflation and today’s ISM report should keep the pressure on the Fed to remain vigilant with their fight against inflation.

    h2 Bitcoin/h2

    Bitcoin is struggling here as Wall Street grows confident that the banking crisis risk has been removed from the table. It is looking like the US banking system has a playbook to deal with the next banking crisis when it emerges, which is somewhat dampening the case for cryptos. Bitcoin wasn’t going to make a move above the $30,000 level before the FOMC decision, so selling it after JPMorgan’s acquisition of the majority of First Republic’s assets.

    Bitcoin has key support at the $27,000 level, followed by the $25,300 region.