18 April 2022 – Daily FX Update

Market overview

Indices are seen to stay red

Crude oil gaining momentum

Gold is shinning

FOREX

Euro

Following a three-day weekend, the benchmark 10-year U.S. T-bond yield opened with a bullish gap and reached its strongest level since December 2018 2.884% during the Asian trading hours.

The European Central Bank’s (ECB) decision to leave the policy settings unchanged last week caused investors to price in a widening policy gap between the ECB and the Fed. Meanwhile, the shared currency slumped to its lowest level in nearly two years before the holiday.

Sterling pound

The markets seem convinced that the Fed will hike interest rates faster than expected to battle the high inflation. However, concerns that a prolonged Russia-Ukraine war would increase the upward pressure on commodity prices. Furthermore, the overall risk-off mindset showed additional aid to the greenback and exerted downward pressure on the sterling pound to push it below 1.3020.

Chinese Yuan

The insignificance decrease in banks reserves may reflect concern by the Chinese central bank (PBOC) over inflation and U.S. monetary tightening, making further interest rate cuts less likely. PBOC on Friday announced a 25-basis-point (bp) cut to banks’ reserve requirement ratio (RRR) from April 25, releasing about 530 billion yuan ($83.16 billion) in long-term liquidity.

Indices

U.S. indices

Wall Street closed lower last week as bond yields continued the uphill climb. Rising 10-year Treasury yields pressured growth stocks, dragging the S&P 500 and the Nasdaq deeply into negative territory, while the Dow posted a more modest loss.

The Dow Jones Industrial Average fell 113.36 points to 34,451.23, the S&P 500 lost 54 points to 4,392.59, while the Nasdaq Composite dropped 292.51 points to 13,351.08.

Metals

Gold prices rose to their highest since mid-March, as the Russia-Ukraine conflict drove investors towards the safety of bullion. China’s economy slowed in March as growth numbers weakened by COVID-19 curbs and the Ukraine war.

Spot gold was up 0.8% at $1,989.65, hitting its highest in more than a month. Meanwhile, U.S. gold futures were up 0.9% at $1,993.40.

Spot silver rose 0.7% to $25.85 per ounce, platinum gained 1.7% to $1,006.27, and palladium climbed 1.4% to $2,400.60.

Crude Oil

Oil prices steadied on Monday as worries over stalling demand in China. That drove market participants to take the earlier gains on concerns over tight supply and the deepening Ukraine crisis. Before the Easter weekend holidays, both benchmarks climbed around 2.5% as the EU might ban Russian oil imports.

Brent futures were up 0.27 to $111.97 a barrel, sliding from their highest since March 30 at $113.80. U.S. West Texas Intermediate futures rose 0.2% to $107.15 after rising as high as $108.55 earlier.