06 May 2022 – Daily FX Update

Overview

USDX is set to a fifth winning week

Sterling pound at two weeks low

Gold on third weekly loss

FOREX

Dollar Index

The dollar is heading for a fifth winning week versus major peers on Friday, ahead of closely watched U.S. jobs report that’s likely to back the case for aggressive monetary policy tightening. The dollar index edged 0.02% higher to 103.59, putting it up 0.35% for the week. It touched 103.94 in the previous session for the first time in two decades.

The dollar initially dropped back sharply on Wednesday, as Fed Chair Jerome Powell said following the rate hike that a 75-basis point increase is not under active consideration.

Euro

The Euro edged down 0.11% to $1.0529 on Friday and was set for a 0.12% weekly drop. However, the single currency has mostly traded sideways since tumbling to a five-year low of $1.04695 during the previous week.

Sterling Pound

The Sterling Pound was set for a 1.81% loss for the week. It fell 2.22% overnight, the most in two years after the Bank of England warned of the risk of recession and hiked its interest rate to 1% as it handed down its policy decision on Thursday.

Australian Dollar

The Australian dollar is set for a 0.52% rally against its U.S. counterpart. The Aussie snapped a five-week losing run after the Reserve Bank of Australia hiked its interest rate to 0.35% and signaled further moves ahead as it handed down its own policy decision on Tuesday.

Indices

U.S. Indices

U.S. payroll data due later on Friday will help traders gauge the strength of the U.S. economy. Experts predicted that the data would show 391,000 new jobs in April, versus 431,000 a month earlier.

U.S. stock index futures dropped 0.6% after the Dow Jones Industrial Average and the S&P 500 both slid more than 3% overnight, and the Nasdaq Composite shed 4.99% in its biggest single-day plunge since June 2020.

U.S. yields are rising on expectations of a fast pace of rate hikes. The yield on U.S. 10-year notes was last 3.063% after crossing 3.1% overnight for the first time since November 2018.

European Indices

European stock markets traded lower, following the wide sell-off in the U.S. markets as investors worried that aggressive central bank tightening will curb economic growth. The DAX in Germany traded 0.8% lower, the CAC 40 in France fell 1.1%, and the U.K.’s FTSE 100 dropped 0.5%.

German industrial production slumped in March, falling 3.9% on the month, illustrating the difficulties the Eurozone’s largest economy has had coping with the pandemic restrictions and the war in Ukraine.

Asian Indices

 Asian shares tumbled to their lowest in seven weeks on Friday and the dollar stood tall as investors globally shunned riskier assets over fears that higher U.S. interest rates and China’s reinforcement of its zero-COVID policy could hit growth hard.

Japan’s Nikkei bucked the trend, rising 0.56% on its return from a three-day holiday. Chinese blue chips shed 2%, the Hong Kong benchmark lost 3.44%, and China’s yuan tumbled to an 18-month low in both onshore and offshore markets.

Metals

Gold was up on Thursday morning in Asia but is on track for a third consecutive weekly loss. The U.S. dollar and Treasury yields both rallied over the U.S. Federal Reserve’s hawkish stance, and investors are now awaiting the latest U.S. jobs report.

Gold futures inched up 0.01% to $1,875.84, with the yellow metal sliding around 1% in the week to date. Benchmark U.S. Treasury yields resumed a climb after hitting their highest level since November 2018 in the previous session. Investors await the latest U.S. jobs report, including non-farm payrolls, which due later in the day.

Silver fell 0.5% to $22.38 per ounce and set for a third consecutive weekly decline. Platinum slid 2.7% and palladium fell 0.6%.

Crude Oil

Oil prices climbed for the third straight session, absorbing concerns about global economic growth as worries about tightening supplies underpinned prices ahead of an impending European Union embargo on Russian oil.

Brent futures rose 88 cents, or 0.8%, to $111.78 a barrel, while U.S. West Texas Intermediate (WTI) crude climbed 84 cents, or 0.8%, to $109.10 a barrel. Omitting calls to increase output, OPEC+ agreed to raise June production by 432,000 barrels per day, in line with its plan to unwind curbs made when the pandemic hammered demand.