Lagarde signals end of negative rates

“Get big quietly, so you don’t tip off potential competitors.” — Chris Dixon 

 

 

HEADLINES

 

• Dollar slides to one-month low as Lagarde comments boost euro 
• Gold prices gain as U.S. dollar pullback boosts appeal
• Oil rises as tight supply counters economy fears and China curbs
• Stocks slump on growth concerns, bond yields slip
• Dow falls nearly 200 points on Tuesday as the sell-off resumes on Wall Street
• GBP/USD to tick down in the coming weeks – HSBC
• USDJPY Near Term: Downside favored

 

 

FOREX

 

 

Dollar slides to one-month low as Lagarde comments boost euro 

 

The U.S. dollar index hit a nearly one-month low on Tuesday after European Central Bank President Christine Lagarde said eurozone interest rates will likely be in positive territory by the end of the third quarter, giving the euro a boost. 

The euro was up 0.39% at $1.0732 at 10:45 a.m. Eastern time. Over the past seven trading sessions, the single currency has rebounded 3.7% after having fallen to its lowest level since January 2017, at $1.0349, earlier this month.

Against a basket of other major currencies, the dollar was down 0.362% at 101.77, its lowest since April 26.

 

 

COMMODITIES

 

 

Gold prices gain as U.S. dollar pullback boosts appeal 

 

Gold prices firmed on Tuesday, as the U.S. dollar weakened to a one-month low for a second consecutive session, making greenback-priced bullion less expensive for overseas buyers. 

The dollar, a rival safe-haven asset to gold, has been falling broadly alongside a decline in Treasury yields from multi-year peaks, with aggressive easing by the Federal Reserve already priced in.

 

 

ENERGY

 

 

Oil rises as tight supply counters economy fears and China curbs 

 

Oil edged higher on Tuesday, recovering earlier losses, as tight global supply and an expected pick-up in demand during the U.S. summer driving season balanced concerns over a possible recession and China’s COVID-19 curbs. 

Oil has surged this year, with Brent hitting $139 in March for its highest since 2008 after Russia’s invasion of Ukraine exacerbated supply concerns.

Even so, worries about threats to the global economy - a main theme of the Davos meeting this week - were behind price falls earlier on Tuesday.

 

 

STOCKS

 

 

Stocks slump on growth concerns, bond yields slip 

 

Shares slid worldwide on Tuesday as supply chain woes and surging costs hurt corporate earnings and slowed manufacturing output, while Treasury yields dipped as the weakness in equities revived a safe-haven bid for U.S. government debt. 

Shares of Snap plummeted 41.1%, dragging down several social media and internet stocks, while Abercrombie fell 29%.

Treasury yields fell to one-month lows as those on benchmark 10-year Treasury notes fell 13 basis points to 2.729%.

The dollar index fell 0.343%, with the euro up 0.38% to $1.073.

 

Dow falls nearly 200 points on Tuesday as the sell-off resumes on Wall Street

 

Stocks fell on Tuesday as investors returned to dumping stocks on fears of a recession following a brief sell-off reprieve.

The Dow Jones Industrial Average fell 190 points, or 0.6%. The S&P 500 lost about 1.5%, and the tech-heavy Nasdaq Composite dropped 2.7%.

The selling was broad on Tuesday with 457 of the S&P 500 members declining. The 10-year Treasury yield made a sudden move lower as investors fearing a recession crowded into bonds sending their prices higher. The 10-year Treasury yield slipped at the way back to 2.73% on Tuesday after climbing as high 3.21% earlier this year.

 

 

ANALYSIS

 

 

GBP/USD to tick down in the coming weeks – HSBC

 

“We expect the GBP to weaken against the USD in the coming weeks, with the BoE likely to maintain a gradually tightening path amid elevated economic uncertainty.” 

“We expect a 25bp hike at the 16 June BoE meeting, with only one more hike thereafter in August, which would take the policy rate to 1.50% before a lengthy pause. By contrast, the market is priced for the tightening cycle to continue into 2023, with the policy rate rising close to 2.50%, and it is already priced for almost a 1-in-3 chance of a 50bp hike in June.”

“UK-EU relations and questions over the UK’s fiscal response to the real income squeeze should also be pertinent to the GBP over the near-term.”

 

 

CHART

 

 

USDJPY Near Term: Downside favored

Technical View: Short position below 127.5. Target 125.55. Conversely, break above 127.5, to open 128.25.

Comments: The pair breaks below support.

Source: Trading Central 

 

 

CALENDAR

 

 

*Times in GMT

 

 

Source: FX Street Economic Calendar

SOURCES

https://www.reuters.com/article/global-forex/forex-dollar-slides-to-one-month-low-as-lagarde-comments-boost-euro-idUSL2N2XG12S 
https://www.cnbc.com/2022/05/24/gold-markets-dollar-federal-reserve-interest-rate-inflation.html 
https://www.cnbc.com/2022/05/24/oil-markets-recession-consumption-oil-supply-china-stimulus.html
https://www.reuters.com/markets/europe/global-markets-wrapup-1-pix-2022-05-24/
https://www.cnbc.com/2022/05/23/stock-market-futures-open-to-close-news.html
https://www.fxstreet.com/news/gbp-usd-to-tick-down-in-the-coming-weeks-hsbc-202205240721