The U.S. easily took the top spot this week against all contenders, not just in the forex market but across the financial space.
Risk-off sentiment seems to have been the dominant theme driven by continued growth, inflation and geopolitical concerns.
Notable News & Economic Updates:
People’s Bank of China cut the Foreign Exchange Deposit Reserve Ratio by 1% on Monday to 8%
Oil rebounded on Tuesday as Chinese central bank assurances of support ease demand concerns
Four European gas buyers made Ruble payments to Russia on Wednesday
Australia Consumer Price Index comes in above expectations at 2.1% q/q vs. 1.3% q/q previous
EIA US weekly crude oil inventories came in at +692K vs +2000K expected
On Thursday, Bank of Canada Governor Tiff Macklem pledged to act “as forcefully as needed” to bring inflation down
U.S. 2022 Q1 advance GDP fell -1.4% versus expectations of around +1.1%
The Bank of Japan kept interest rates on hold at -0.10% on Thursday as expected
Despite public frustrations, the Chinese government dug deeper into zero-COVID policy on Friday; Beijing ordered schools to close to contain virus
Intermarket Weekly Recap
Looking at the chart above, it’s looking like it was a risk-off kinda week as most major asset classes spend the majority of the time in the red.
It’s likely the driver for this environment continues to be slowing economic growth and high inflation concerns, which gave us fresh catalysts as early as Monday. It was then that we got that Beijing would likely begin lockdown protocols to contain the fast spreading COVID-19 pandemic, further raising the odds of a recession in China.
We also got news from the Ukraine War that Russian President Putin dropped plans for a peace deal, instead looking to capture more territory in Ukraine. From that front, we got alarming comments from Russian Foreign Minister Lavrov when he warned that there are real risks of nuclear war.
So, there was a lot to be fearful of early in the week, which is likely why we saw the U.S. dollar moving higher from the jump, while most asset classes, even gold, in the red.
Fortunately for risk bulls, risk sentiment started lean a bit more positive starting on Wednesday, arguably linked to reports that the People’s Bank of China will step up support for the economy as China continues to battle the resurgence of COVID-19.
We also see a big of a pop higher in risk taking on Thursday, correlating with the weaker-than-expected update in expected U.S. GDP. A bit of a weird reaction, but arguably, weakness in recent economic updates may be making the case that central banks may not be as forceful with policy tightening as priced in by traders up until this week.
Risk sentiment shifted back negative on Friday, possibly a refocus by the market on the COVID situation in China after the Chinese government re-iterated their focus on ZERO-COVID (i.e., lockdowns, school closures and mass testing). Also, preliminary GDP data from the Eurozone came in below expectations on net, possibly contributing to the risk-off turn in sentiment as well.
Again, the U.S. dollar was king it is likely we are witnessing de-risking by traders across all markets at the moment. This is arguably signaled by strength in the Japanese yen, which took the second spot among the major currencies, despite virtually guaranteeing ultra-loose monetary policy for the foreseeable future.
Dallas Fed Manufacturing Survey Index ticked -2 points lower to 10.8 in April
U.S. home-price appreciation accelerates once again, up +20.2% y/y in Feb. vs. +18.9% y/y in Jan.
U.S. new home sales fell by -8.6% in February
U.S. Consumer confidence index ticks lower to 107.3 in April from 107.6 in March
U.S. Durable Goods Orders: +0.8% in March vs. +1.7% in February
Richmond Fed Manufacturing Index: 17 in April vs. 13 in March
U.S. mortgage applications slide by -8.3%, the lowest rate since 2018
U.S. pending home sales fall by 1.2%, the lowest since May 2020, on rising rates and high home prices
U.S. GDP drops 1.4% in Q1 2022, shrinks for first time since 2020
U.S. weekly initial jobless claims fall to 180k vs. 180k expected
Core PCE Index rose 6.6% y/y in March (fastest rate since 1982); Employment costs grew 1.4% q/q
U.S. consumer sentiment index for April was revised lower to 65.2 vs. a preliminary read of 65.7
U.K. House Price Index rose +1.6% in April to a new record average high of £360,101
U.K. public sector net borrowing increased from 9.9B GBP to 17.3B GBP
U.K. Nationwide House Price Index grew at 0.3% in April vs. 1.1% previous
France’s Macron wins a second term, defeats Le Pen in first reelection win in 20 years
German Ifo Business Confidence: 91.8 in April vs. 90.8 in March
GfK: German consumer morale falls to a historic low of -26.5 heading into May
Spanish unemployment rate climbed from 13.3% to 13.6% vs. 13.0% estimate
French flash GDP: +0.0% q/q vs. 0.3% forecast; Flash CPI above forecast at 0.4%
Germany’s import prices up by 31.2% y/y in March, the fastest increase since 1974
ECB’s Lane say first rate hike is no big deal, cautious on further moves
Germany Preliminary GDP: 0.2% q/q as expected
Euro area GDP flash estimate for Q1 2022: 0.2%; +0.4% in the EU
Swiss trade surplus narrowed from 5.88B CHF to 2.99B CHF vs. projected 6.23B CHF
Swiss National Bank Chair Thomas Jordan said on Friday that higher inflation has not yet justified an interest rate hike
Swiss National Bank Chair Thomas Jordan also said that the SNB owns no bitcoin, but could buy it in the future.
Swiss Retail trade turnover in March fell by -5.9%
On Monday, Bank of Canada Governor Tiff Macklem said BOC to consider another half-percentage-point rate hike at its next policy decision
Canada GDP rose by +1.1% in February vs. 0.2% in January
New Zealand credit card spending jumped 3.4% vs. previous 1.1% gain
New Zealand trade deficit narrowed from NZ$691M to NZ$392M
New Zealand ANZ business confidence index dipped from -41.9 to -42.0 in April
Australia’s inflation hits a 21-year high of 5.1%, prompting AU banks to pull forward rate hike calls
Australian Consumer Confidence weekly survey came in at 96.5 vs 96.8 prev.
Australian Q1 import prices rose 5.1% vs. 7.1% forecast, 5.8% previous
Australia’s producer prices rocket by 21.2% y/y to fresh record highs in Q1 2022
Japan Services PPI: +1.3% y/y in March vs. 1.1% previous
Japanese BOJ core CPI up from 1.0% to 1.1% as expected
Japanese Finance Minister Suzuki continues to jawbone yen but denies joint intervention with US
Japanese preliminary industrial production ticked 0.3% higher vs. 0.5% forecast
Japanese retail sales rose 0.9% vs. expected 0.3% gain, previous 0.9% drop
The Bank of Japan kept interest rates on hold at -0.10% as expected on Thursday; they revised up their inflation forecast to near 2%; vowed to keep interest rates ultra-low by buying an unlimited amount of bonds daily