April 8th – Daily FX Fundamental Update

Market overview

Caution controls the market

The U.S. dollar dominates

It is all about Fed’s decision

ECB policymakers support stimulus reduction

FOREX

USDX

The US dollar index extended a relentless upward move, reaching a new two-year peak. The dollar index rose as high as 99.904 in early Asia trade, its best level since May 2020. Additionally, the index was up 1.3% this week, which would be its biggest advance in one month.

Meanwhile, the benchmark U.S. 10-year Treasury yield also hit a three-year high during the previous session. The Fed’s hawkish outlook in its latest meeting gave the greenback an extra boost.

EURUSD

The Euro fell 0.2% to 1.0855, at a new one-month low against the greenback, amid an agreement of the European Union to ban Russian coal. This decision came out as punishment for the Russian attack on Ukrainian.

The notes from the March meeting of the European Central Bank showed policymakers eager to de-stress stimulus. However, but the specter of a euro-area recession caused the central bank to pause.

Elsewhere

The Japanese Yen weakened against the U.S. dollar. The USDJPY pair gained 0.1% to 124.09, climbing to its highest level in over a week and approaching near seven-year high of 125.10. Meanwhile, the Cable fell 0.2% to 1.3043, Aussie edged lower to 0.7477, while the Chinese Yuan weakened to trade at 6.3626 per U.S. dollar.

INDICES

United States

U.S. stock indices were mostly green yesterday as market participants burst up beaten-down shares, while the U.S. dollar climbed. Additionally, the U.S. 10-year Treasury yield touched a three-year high following the hawkish signals from the Federal Reserve.

The Dow Jones Industrial Average rose 0.25% to 34,583.57, the S&P 500 gained 0.43% to 4,500.21, while the Nasdaq Composite was almost flat around 13,897.30.

Europe

European stock markets opened higher this morning, ending a volatile week on a positive pace. Market participants continued to digest the potential of tighter monetary policy, more sanctions on Russia, and potential French political turmoil. The German index DAX futures traded 1.4% higher, the French index CAC 40 futures rose 1.5% while U.K.’s FTSE 100 futures climbed 1%.

Despite these gains, European equity markets are set to end the week lower. This week the DAX shed around 1.2%, the CAC 40 down 1.9%, and the Euro Stoxx 50 index was 1.6% weaker.

Asia-Pacific

Asia Pacific stocks were mostly down on Friday morning. However, investors continue to monitor both the U.S. Federal Reserve’s monetary policy plan and the latest COVID-19 outbreak in China.

Japan’s Nikkei 225 edged down 0.19% amid data released earlier showing February current account was JPY1.648 trillion ($13.31 billion). In China, Hong Kong’s Hang Seng Index was down 0.53%, while China’s Shanghai Composite was down 0.69%. On the other hand, the Australian ASX 200 rose 0.62%.

METALS

Gold futures traded 0.46% lower at $1,928.9 in Asia. The dollar strengthened as the U.S. Federal Reserve looks to tighten its monetary policy quicker than expected. This sudden change in pace partially offset the safe-haven demand from the ongoing war in Ukraine.

Gold is supported by the Ukraine war, rapid inflation, and the COVID-19 pandemic. However, the Fed’s aggressive stance to fight inflation will put a lid on gold prices.

Silver inched 0.1% lower, platinum shed 0.2%, while palladium rose 1.4%. Both platinum and palladium are set for fifth consecutive weekly losses.

ENERGY

Oil prices rose on Friday but lost around 3% during the week. Consuming countries’ planned release of 240 million barrels from emergency stocks offset some concerns over reduced supplies from Russia. The release of strategic inventory may prevent crude oil producers from increasing output even with high oil prices.

Furthermore, market participants are assessing the oil market amid uncertainties over slowing demand in China due to COVID-19 outbreak.

Brent crude futures advanced 0.2% to $100.77 a barrel, while WTI crude futures gained 4% to $96.37a barrel.