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Dollar index highest since May 2020

“Far and away the best prize that life offers is the chance to work hard at work worth doing.” – Theodore Roosevelt

 

 

HEADLINES

 

 

  • Dollar slides from near two-year high amid hawkish signals from Fed
  • Gold firms as Ukraine crisis perks up demand for inflation hedge
  • Oil reverses early gains, turning lower
  • Dow rises 100 points as markets try to recover from two-day Fed-induced sell-off
  • USD to continue benefiting from aggressive tightening from the Fed – Wells Fargo
  • EURJPY Near Term: Downside favored

 

 

FOREX

 

 

Dollar slides from near two-year high amid hawkish signals from Fed

 

 

The dollar slipped from a near two-year high on Thursday, as investors digested hawkish signals from the Federal Reserve and wondered whether expected tightening moves in the future have already been priced in. 

The dollar index hit 99.823 on Thursday, the highest since late May 2020. It was last flat at 99.639.

St. Louis Fed president James Bullard, a voter this year on the Federal Open Market Committee and a known hawk, continued to sound the alarm on inflation on Thursday. He noted that in the Fed's past four tightening cycles, the dollar has depreciated by an average of 4.0%. The dollar currently sits at a nine-month gain of 7%.

 

 

COMMODITIES

 

Gold firms as Ukraine crisis perks up demand for inflation hedge

Gold prices inched up on Thursday, as inflation worries intensified by the Ukraine war and mounting sanctions on Russia eclipsed pressure from the U.S. Federal Reserve’s aggressive policy stance.

Minutes of the Fed’s March meeting showed deepening concern among policymakers that inflation had broadened through the economy, with “many” participants prepared to raise interest rates in 50-basis-point increments in coming policy meetings.

 

 

Oil reverses early gains, turning lower

Oil prices gave back early gains to trade in the red on Thursday.

Both benchmarks plunged more than 5% in the previous session and hit their lowest closing levels since March 16.

Japan will release 15 million barrels of oil from state and private reserves as part of the move, Kyodo news agency reported on Thursday. Russia’s production of oil and gas condensate fell to 10.52 million bpd on April 1-6 from a March average of 11.01 million bpd.

 

 

STOCKS

 

 

Dow rises 100 points as markets try to recover from two-day Fed-induced sell-off

 

 

tocks erased earlier losses and climbed higher on Thursday, following back-to-back losing sessions, as investors reassessed the Federal Reserve’s latest plans to tighten monetary policy and combat rising inflation.

Defensive names like consumer staples and health care companies led the market comeback Thursday as investors continued their search for stocks with stable earnings and dividends. Costco rallied 4%, while Pfizer popped 4.5%.

 

 

ANALYSIS

 

 

USD to continue benefiting from aggressive tightening from the Fed – Wells Fargo 

 

 

“Despite more hawkish foreign central banks, we maintain our view that aggressive tightening from the Federal Reserve should support the U.S. dollar over the medium to longer term. We expect the Fed to remain at the forefront of major central bank tightening, and now expect two 50 bps hikes from the Fed and a more pronounced tightening cycle compared to last month.”

“In our view, the Fed will likely be one of the more hawkish central banks in the world, which could boost the U.S. dollar. While the greenback should remain strong, we nonetheless believe the extent of U.S. dollar strength and foreign currency weakness may be mitigated to some extent by foreign central banks also raising policy rates faster and by more than previously expected.”

 

 

CHART

 

 

EURJPY Near Term: Downside favored

 

 

Technical View: Short position below 136.3. Target 134.2. Conversely, break above 136.3, to open 136.9.

 

 

Comments: The pair is expected to resume descend after correction.

 

 

Source: Trading Central
 

 

CALENDAR

 

 

*Times in GMT

 

 

Source: FX Street Economic Calendar

Footnotes
https://www.reuters.com/business/dollar-buoyant-fed-readies-step-up-inflation-fight-2022-04-07/ 
https://www.fxstreet.com/news/usd-to-continue-benefiting-from-aggressive-tightening-from-the-fed-wells-fargo-202204071607 
https://www.cnbc.com/2022/04/07/gold-markets-federal-reserve-us-dollar-inflation-.html
https://www.cnbc.com/2022/04/06/stock-market-futures-open-to-close-news.html
https://www.cnbc.com/2022/04/07/oil-markets-oil-reserves-russia-ukraine-war
 

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