Overview

Euro gains breathing room

Oil supported by supply interruption

Gold is supported near $1,950

FOREX

U.S. Dollar index

The U.S. dollar edged higher in early European trade Friday, boosted by rising U.S. bond yields as the Fed chair cemented the expectations for aggressive monetary tightening. The Dollar Index traded 0.1% higher at 100.760, not far from the two-year high of 101.03 seen earlier in the week.

U.S. Federal Reserve Chairman Jerome Powell indirectly supported market expectations of a 50-basis-point hike at the next FOMC meeting in May.

Sterling Pound

The Sterling pound fell 0.5% to 1.2967 amid reports showing that U.K. retail sales declined by 1.4% from February, rather than the 0.3% drop expected. Earlier today, market research group GfK reported that consumer confidence in the U.K. fell to its lowest since 2009 April. Also, this is the third retail sales drop in the last four months as the cost-of-living crisis mulled heavily on consumer confidence.

Chinese Yuan

This dollar strength against the Chinese yuan as China’s economy was hit by softening demand abroad and strict lockdowns at home.

Chinese Yuan weakened by 0.3% to 6.4687, reaching a seven-month low against the Greenback. Worries of extended COVID-19 lockdowns will sharply curb economic activity in the world’s second-largest economy.

Nomura downgraded its full-year GDP growth forecast for China to 3.9% from 4.3%, citing a worsening economic outlook and disruptions due to the country’s COVID Zero strategy.

Japanese Yen

Japanese Yen traded 0.4% higher against the U.S. Dollar near 127.92, as the yen gained support from reports that the finance minister discussed the idea of coordinated currency intervention with his U.S. Treasury Secretary Janet Yellen earlier in the week.

However, the USDJPY pair remains up well over 1% this month, having climbed to a two-decade high of 129.43 earlier this week.

Indices

U.S. Indices

Indices futures were lower in early morning trading. The S&P 500 attempted to avoid another losing week amid busy earnings and rising bond yields. Dow Jones futures dipped 0.3%. While S&P 500 futures fell 0.5% and Nasdaq 100 futures shed 0.4%.

The early morning action followed a dramatic reversal Thursday that saw major averages wiping earlier gains and closing lower. The Dow ended the day more than 300 points lower, while the S&P 500 dropped nearly 1.5%. The tech-heavy Nasdaq Composite bore the brunt of the sell-off on surging rates, sliding 2%.

The Dow is up 1% during the week, on pace to break a three-week losing streak. The S&P is up less than 0.1% on the week and attempting to break a two-week losing streak. However, the Nasdaq is down 1.3% on track to post its third negative week in a row.

European Indices

European stock markets traded sharply lower today, with investors fretting about the possibility of slowing economic growth amid monetary policy tightening in addition to the impact of the war in Ukraine.

Money markets are now pricing in 80 basis points of ECB rate hikes by the end of the year. Besides, the world’s major central banks are looking to tighten monetary policy to fight skyrocketing inflation, just as the war in Ukraine weighs on the outlook for global growth.

European equities indices were red during the early European trading session, as the DAX was 1.2% lower, the CAC 40 fell 1%, and the FTSE 100 dropped 0.4%.

Asian Indices

Asian stocks were down, with U.S. Federal Reserve Chairman Jerome Powell toughening his stance on inflation. Market participants are now bracing for more aggressive monetary policy tightening.

Japan’s Nikkei 225 slid 1.96%. Data released earlier in the day showed that the consumer price index (CPI) grew 0.4% month on month, the national core CPI grew 0.8% year on year, and the national CPI grew 1.2% year on year in March 2022. The manufacturing purchasing managers index (PMI) for April was 53.4 and Japan also released its services PMI.

The China Securities Regulatory Commission said that it held a meeting Thursday with institutional investors where it asked them to increase their equity investments. China’s Shanghai Composite inched down 0.08%, while Hong Kong’s Hang Seng Index fell 1.27%.

Metals

Gold prices dipped on Friday and were on track for their first weekly loss in three, as rising U.S. Treasury yields and a firmer dollar dented bullion’s appeal. Gold is extremely sensitive to rising U.S. short-term interest rates and higher yields, which increase the opportunity cost of holding non-yielding bullion.

Spot gold was down 0.2% at $1,947.36 per ounce today, while gold futures rose 0.2% to $1,952.10. Gold is down about 1.3% so far this week. Prices rose to near the key mark of $2,000 per ounce on Monday on safe-haven demand and mounting worries over inflation, only to pull back and hit a two-week low in the previous session.

Spot silver fell 1.3% to $24.32 per ounce, while platinum retreated 0.6% to $962.53. Meanwhile, palladium slightly changed at $2,422.88.

Crude Oil

Oil slipped on Friday, burdened by the prospect of weaker global growth, higher interest rate, and COVID-19 lockdowns in China hurting demand even as the European Union considered a ban on Russian oil that would further tighten supply.

The outlook for demand in China, the world’s biggest oil importer, continues to weigh on oil prices. Brent crude was down 0.7% to $107.57 today, while WTI crude declined 0.3% to $103.47.

Losing 550,000 barrels per day (bpd) of output in Libya supported crude prices. Additionally, supply might decline if the European Union imposes an embargo on Russian oil.