US Open Note – Market sentiment dulls with growth worries



US yields ebb and heavy dollar follows

A risk-off tone has gripped markets as rekindled growth concerns are being highlighted due to China supply constraints from lockdowns, the domino effects from the Russian invasion on Ukraine and pressures on central banks who are expected to do more to bring inflation lower without pushing their economies into recession. The already aggressive Federal Reserve is finding its job to curb inflation more challenging as the degree or constant pace of tightening is important as the United States and global economies are simultaneously tackling unprecedented obstacles.

The reserve currency’s index remains under pressure around the 102.00 barrier after fading from the 105.00 mark. The dollar index has deteriorated by 3.13% over the last eight sessions, and recently sliding US treasury yields are not defending the greenback. The US 10-year is yielding 2.82%, the 5-year 2.83% and the 2-year 2.59%.

Meanwhile, a drop in US yields seems to have assisted gold on its bullish bearing, which is currently at $1,860/oz, but it’s haven appeal remains somewhat dormant in light of fresh rising growth concerns and muted risk appetite in markets. However, the Swiss franc and the yen are sustaining a haven inclination with the franc at 0.9625 and the yen at 127.20 per dollar.

New home sales in April collapsed an astounding 16.6% m/m to a seasonally adjusted annual rate of 591 k in April of 2022, a two-year low level from April 2020, and deteriorating below forecasts of 750 k in the midst of rising construction costs and mortgage costs, which make buying a house less affordable.

The Richmond manufacturing index highlighted the reported decline in business activity in May. The composite manufacturing index snowballed from 14 in April to -9 in May as two of the three components of the index turned negative.

ECB and Bank of England vibes

Is there resilience in the euro and the pound or are the moves in the major pairs driven mainly by the weaker dollar? The euro’s recent gains are holding above $1.0700 on the back of mixed Flash PMIs out of Germany and France, while the pound has surrendered yesterday’s gains after a larger miss in Flash service PMIs due to a surge in input cost inflation in the service economy. UK growth in the private sector slumped and the pound has now stabilized around the $1.2480 price level.

Today European Central Bank’s Christine Lagarde injected some hawkish rhetoric into markets mentioning that she sees the ECB’s deposit rate, which is currently at -0.50%, at zero or ‘slightly above’ by Q3, indicating that we may have two quarter hikes in the pipeline. However, ECB hawks considered this as a sign of weakness as it removed a 50 basis points hike from the ECB’s arsenal. Lagarde tried to upgrade her remarks by stating a cautious pace is likely to be adopted highlighting that record inflation, April’s figures being 7.4%, is being fed by supply side market attributes that trickle back to elevated prices in fuel, exacerbated by the Russian invasion on Ukraine, and pandemic restrictions lingering in China.

Persistent Chinese lockdowns and countries that are limiting exports of soft commodities are beginning to paint a picture where global households will be faced with higher inflation as elevated costs accompany fuel, services, goods and food. Curbing consumers purchasing power could not only slow inflation but hit growth too, as central banks are monitoring both indicators closely.

Heightened food protectionism may snag the cogs of the free functioning market, and this could exacerbate food security risks for those most vulnerable. Down the road, developed countries are not walled off from these risks either.

Lower income households in the UK are struggling to feed themselves and those people who spend a big chunk of their budget on food look to be affected the most. A huge portion of UK citizens have minimized food purchases due to the squeeze on their incomes. The key point is that restaurants and hospitality businesses could take a serious hit if this prolongs, as eating out and travelling represent discretionary spending.

Oil and antipodeans

The risk-off tone has trickled to the antipodeans who have retreated somewhat due to uncertainty surrounding global growth. AUDUSD is around $0.7070 and NZDUSD is at $0.6440. WTI oil futures have pushed to $111.00 per barrel, breaching the Asian session start level, while the loonie has remained unchanged around C$1.2800.

Fed Chair Powell is due to deliver pre-recorded opening remarks at 14:20 GMT at the National Centre for American Indian Enterprise Development Reservation Economic Summit.

UK MPC Member Tenreyro is speaking at 17:15 GMT and following is ECB’s Christine Lagarde, who is to deliver opening remarks at a session of the World Economic Forum in Davos.

면책조항: XM Group 회사는 체결 전용 서비스와 온라인 거래 플랫폼에 대한 접근을 제공하여, 개인이 웹사이트에서 또는 웹사이트를 통해 이용 가능한 콘텐츠를 보거나 사용할 수 있도록 허용합니다. 이에 대해 변경하거나 확장할 의도는 없습니다. 이러한 접근 및 사용에는 다음 사항이 항상 적용됩니다: (i) 이용 약관, (ii) 위험 경고, (iii) 완전 면책조항. 따라서, 이러한 콘텐츠는 일반적인 정보에 불과합니다. 특히, 온라인 거래 플랫폼의 콘텐츠는 금융 시장에서의 거래에 대한 권유나 제안이 아닙니다. 금융 시장에서의 거래는 자본에 상당한 위험을 수반합니다.

온라인 거래 플랫폼에 공개된 모든 자료는 교육/정보 목적으로만 제공되며, 금융, 투자세 또는 거래 조언 및 권고, 거래 가격 기록, 금융 상품 또는 원치 않는 금융 프로모션의 거래 제안 또는 권유를 포함하지 않으며, 포함해서도 안됩니다.

이 웹사이트에 포함된 모든 의견, 뉴스, 리서치, 분석, 가격, 기타 정보 또는 제3자 사이트에 대한 링크와 같이 XM이 준비하는 콘텐츠 뿐만 아니라, 제3자 콘텐츠는 일반 시장 논평으로서 "현재" 기준으로 제공되며, 투자 조언으로 여겨지지 않습니다. 모든 콘텐츠가 투자 리서치로 해석되는 경우, 투자 리서치의 독립성을 촉진하기 위해 고안된 법적 요건에 따라 콘텐츠가 의도되지 않았으며, 준비되지 않았다는 점을 인지하고 동의해야 합니다. 따라서, 관련 법률 및 규정에 따른 마케팅 커뮤니케이션이라고 간주됩니다. 여기에서 접근할 수 있는 앞서 언급한 정보에 대한 비독립 투자 리서치 및 위험 경고 알림을 읽고, 이해하시기 바랍니다.

우리는 웹사이트에서 최고의 경험을 전해드리기 위해 쿠키를 사용하고 있습니다. 자세히 읽거나 쿠키 설정을 변경하세요.

리스크 경고: 고객님의 자본이 위험에 노출 될 수 있습니다. 레버리지 상품은 모든 분들에게 적합하지 않을수 있습니다. 당사의 리스크 공시를 참고하시기 바랍니다.