The dollar index reached fresh 2-year highs overnight, as traders digest Fed Chair Powell’s latest hawkish comments. Yesterday, he indicated a willingness to hike rates more aggressively, including front-loading hikes in its tightening cycle – traders think possibly 2x75 bps hikes in upcoming meetings. Asian and European stocks are lower, and US stocks opened down despite another round of great corporate earnings reports. The UK pound dropped 1% and to its lowest level since November 2020, as multiple data releases show that the UK economy is slipping. US Treasury yields are up slightly, the 10Yr at 2.93%. Gold is lower by $20 an oz to $1930. Oil is steady at $103.
April 22, 2022
EUR/USD 1.0812 GBP/USD 1.2872 USD/CAD 1.2691 AUD/USD 0.7273 USD/JPY 128.27 USD/CNH 6.5298 USD/ILS 3.2633 USD/MXN 20.2930 USD/CHF 0.9562 USD/INR 76.4837 USD/BRL 4.7245 USD/SGD 1.3690 USD/DKK 6.8789 USD/SEK 9.4967 USD/NOK 8.9143
The dollar is broadly higher fueled by the Fed’s hawkish comments yesterday. USD made its biggest gains against the UK pound, closely following both the AUD and NZD – all were lower by about 1%. The US corporate earnings season continues to be upbeat: Bloomberg reports “ 98 S&P500 companies have reported quarterly earnings, 79% have beaten profit estimates and 65% surpassed sales forecasts. Positive surprises are seen in all industry groups, underpinning a broad-based recovery.” This morning’s release of PMIs surprised on the downside – Services PMI for April was the second lowest number since June 2020.GBP
The UK pound is the worst performing currency overnight, as GBP/USD dropped below $1.29 for the first time since October 2020. A slew of surprisingly weak economic stats released this morning triggered the sell-off – UK Retail Sales for March fell 1.4% MoM and April’s UK Composite PMI of 57.6 was weaker than 58.7 expected and 60.9 for March.EUR
The euro edged lower against the broadly stronger dollar. The hawkish Fed is driving the USD higher while the ECB continues to wait. ECB President says it remains data-dependent and signaled that June’s meeting will be critical in determining next steps. This morning’s release of PMIs for the eurozone were all better than expected.CAD
The USD/CAD raced higher overnight, reaching its highest level in a month. The uber-hawkish Fed is driving USD higher even as odds increase for a 75 bp hike by the Bank of Canada at its June 1 meeting. Energy prices are only slightly lower, but holding above $100 a barrel.ASIA/PACIFIC
According to Bloomberg, the Chinese yuan is on track for its worst weekly performance since 2015. The USD/CNY jumped above 6.50, its highest level since July 2021, on the back of the broad-based strength in the USD, and data showing increased weakness in China’s economy.
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