28 April 2022 – Daily FX Update

Overview

European data is weaker again

Gold dipped below $1,900

Markets await Fed’s meeting

FOREX

U.S. Dollar

The dollar hit a five-year high yesterday as market participants await the Federal Reserve next week which is expected to hike rates. Meanwhile, the euro weakened on growth concerns after Russia cut off gas supplies to parts of the region.

The Fed is expected to increase rates by 50 basis points at its May 3-4 meeting and in June and July. Additionally, the greenback has also benefited from global growth concerns as Europe struggles with the fallout from Russia’s invasion of Ukraine and China enacts lockdowns in a bid to stem the spread of COVID-19.

Euro (EURUSD)

The euro fell 0.83% to $1.0549 reaching its weakest since March 2017. The common currency has fallen 4.7% so far in April and is set for its worst monthly loss in more than seven years.

Furthermore, on Wednesday, Germany’s economy ministry cut its economic growth forecast for 2022 to 2.2% from its late January prediction of 3.6% growth this year. Also, French consumer confidence fell more than expected in April.

Japanese Yen (USDJPY)

The stronger dollar also blunted an attempted bounce for the yen, which had seen some support from safety flows and positioning for the risk of a policy shift.

The yen last traded at 128.09 per dollar, after hitting a 20-year low of 129.4 last week. Investors anticipate if the Bank of Japan will make any changes to its yield curve control policy to stem yen weakness when it concludes its two-day meeting on Thursday.

Australian Dollar (AUDUSD)

The Australian dollar touched its lowest level since February but caught some wind after Australian consumer prices surged at their fastest annual pace in two decades, spurring speculation that interest rates could be lifted from record lows as soon as next week. The Aussie was up 0.08% at $0.7131.

Indices

U. S. Indices

U.S. stocks rebounded on Wednesday as a strong earnings report from Microsoft late Tuesday helped stop the rout in technology stocks.

The Dow Jones Industrial Average rose 0.6%, while the S&P 500 was up 0.7% and the NASDAQ Composite was up 0.7%.

Tech stocks tumbled 4% on Tuesday as fears of a global economic slowdown gripped the market, dragging the Nasdaq to its lowest level since 2020.

Asian Indices

Asia Pacific stocks were mostly up during the early trades as China pledged further economic support. Hong Kong’s Hang Seng Index gained 0.51% while China’s Shanghai Composite was up 0.49%.

Chinese stocks traded in the U.S. also rose to their highest level since early April 2022, after China’s State Council pledged at its latest meeting to stabilize employment.

Japan’s Nikkei 225 gained 0.62% with industrial production increasing 0.3% month-on-month and retail sales rising 0.9% year-on-year in March 2022. The S&P/ASX 200 rose 0.92%, as Australia released retail sales figures earlier in the day.

Metals

Gold futures gained 0.56% to $1,878.10 after hitting their lowest price in two months.  Gold has been holding very well above $1,900 but falls under pressure from the expectations of the U.S. Federal Reserve to raise interest rates by 50 basis points in the following week.

According to the World Gold Council, Global demand for gold surged in the first quarter of 2022 to the highest in over three years, driven by investors worried about the war in Ukraine and inflationary pressures.

Similarly, silver inched down 0.1% and platinum eased 0.4% to $914.17, while palladium jumped 1.2%.

Crude Oil

Oil prices rose for the second day in a row on Wednesday after data showed weekly consumption of fuels in the United States offset builds in crude.

A soaring dollar capped the market’s gains. China’s grappling with new coronavirus cases also clouded the economic outlook for the world’s biggest importer of crude oil. Brent crude settled up 0.3%, at $105.32 a barrel.

Meanwhile, West Texas Intermediate (WTI) settled up 0.3% at $102.02 per barrel and WTI rose 3.2% on Tuesday, after a 2% slide in the previous session took the U.S. crude benchmark to a two-week low of $95.28.