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It was Dollar  and Yen up and everything else down this week as risk aversion sentiment continues to be the major market driver, this week boosted by significant negative events in the crypto space.

Notable News & Economic Updates:

China Premier Li Keqiang warned of a “complicated and grave” employment situation in China on Monday

USTerra stablecoin lost its peg, crashing the price of LUNA to effectively zero and significantly damaging broad crypto (especially stablecoin) sentiment

G-7 Leaders commit to banning oil imports from Russia

UAE Energy Minister: Oil market is balanced, no need for OPEC+ to adjust

Chinese Vice Premier Liu He reaffirmed the country’s zero-COVID policy

Draghi says European companies can pay for gas in Rubles without breaking sanctions

On Thursday, Russia Warned against Finland, Sweden joining NATO

Oil rose on Thursday as supply concerns outweighed reduced demand expectations and recession risks

Hong Kong Monetary Authority bought $722M worth of HK dollars on Thursday

Several Federal Reserve officials focused on 50 bps rate hike rhetoric this week, dismissing the need for big hikes for now.

Intermarket Weekly Recap

Dollar, Gold, S&P 500, Oil, U.S. 10-yr Yield, Bitcoin Overlay 1-Hour

Dollar, Gold, S&P 500, Oil, U.S. 10-yr Yield, Bitcoin Overlay 1-Hour

Broad risk-off vibes this week once again this week with the usual drivers we’ve seen throughout 2022: continued inflation, high inflation fears, the war in Ukraine, and economic slowdown fears as central banks reduce liquidity.

A crypto crisis event brew this week adding to the broad risk sentiment fears as the Terra protocol crumbled in a matter of days after its stablecoin, UST, depegged by as much as $0.90 from the U.S. dollar. Many speculate that this  appears to have been a coordinated attack as a massive amount of UST was flooded on to exchanges last weekend, while some argue it was a whale trade that triggered a weakness in the design of the Terra ecosystem.

Whatever the case may be, this had ripple effects throughout the entire crypto asset space as UST was a large part of the Decentralized Finance (DeFi) ecosystem (the second largest by total value locked of over $20B before the event), used as collateral and in liquidity pools across the major blockchains, including Ethereum and Avalanche.

This also brought the stability of stablecoins into focus, especially after the world’s largest stablecoin, USDT, began to lose its peg on Thursday. This story is still developing, but whatever the outcome or truth may come to light, this is no doubt one of the biggest wealth destruction events in crypto history and likely contributed to the broad market risk aversion theme.

Back to macro economics, inflation came in hot again, highlighted by the latest consumer prices data from the U.S. and China, which came in above expectations on both the headline and core CPI reads.

We also saw data pointing to a slowing economic picture as investor sentiment continued to show negative vibes from Europe, Japanese spending turned negative, and U.K. preliminary GDP came in below expectations at 0.8% q/q.

And despite prospects of a slowdown, central bank rhetoric on monetary policy tightening remained strong, especially from the U.S. as multiple Federal Reserve members signaled continued expectations of 50 bps hikes ahead.

All put together, this is likely why we saw all assets were down against the U.S. Dollar and Japanese yen, with the yen taking the slight edge as traders de-risk on growing concerns of stagflation (slowing economic growth and high prices) ahead.

USD Pairs

Overlay of USD Pairs: 1-Hour Forex Chart

Overlay of USD Pairs: 1-Hour Forex Chart

On Monday, Fed’s Bostic said that there was no need to move faster than half-point hikes; Fed’s Neel Kashkari is confident that inflation can come down, but not without some pain

NFIB U.S. small business optimism index: 93.2 in April vs 93.2 previous

Federal Reserve Bank of New York’s quarterly household debt report: mortgage debt climbed to $11.18T

Treasury Secretary Yellen pointed to hedge funds and unregulated cryptocurrency as sources of market instability

US April CPI +8.3% y/y vs 8.1% expected; core CPI at 0.6% vs. 0.4% consensus, 0.3% previous

Average U.S. mortgage interest rate rises to 5.53%, applications up

Bullard: April inflation ‘hot’ but does not see 75 bp Fed rate increase ‘for now’

Weekly U.S. Jobless Claims: +203K vs. 202K previous

U.S. PPI rose +11.0% y/y in April; +0.5% m/m

Federal Reserve Chair Jerome Powell was confirmed by the Senate for a second term; says he can’t guarantee a “soft landing” as the Fed looks to fight inflation but reassures that big hikes off table for now

U.S. consumer sentiment fell to 59.1 in April vs. 64 forecast

GBP Pairs

Overlay of GBP Pairs: 1-Hour Forex Chart

Overlay of GBP Pairs: 1-Hour Forex Chart

Bank of England’s Saunders worries inflation will be higher than forecasts

UK’s Truss set to ditch N.Ireland protocol after giving up on EU talks -The Times

U.K. preliminary 2022 Q1 GDP came in at 0.8% q/q vs. 1.0% q/q forecast

U.K. construction output jumped 1.7% vs. projected 0.2% uptick in March

U.K. March industrial production sank by 0.2% vs. estimated flat reading

Deputy Governor Dave Ramsden said on Thursday that the BOE is not yet done with rate hikes as inflation risks remain high

EUR Pairs

Overlay of EUR Pairs: 1-Hour Forex Chart

Overlay of EUR Pairs: 1-Hour Forex Chart

Bulgaria says will veto EU oil sanctions on Russia if it does not get derogation

Finnish central bank chief Rehn wants a rate hike in July and to see rates at zero by autumn

Eurozone Sentix Investor Confidence Near 2-Year Low at -22.6 vs. -20.8 forecast

France trade balance in March: -€12.4B vs -€10.3B previous

Italian industrial production stays flat vs. projected 0.1% dip

Germany ZEW survey current conditions -36.5 in May vs -35.0 expected

Lagarde was cementing market expectations that the ECB will raise its policy rate for the first time in over a decade in Jul

ECB to start raising rates gradually this summer – Villeroy

Germany April final CPI +7.4% vs +7.4% y/y prelim

Eurozone industrial production for March: -1.8% m/m vs -2.0% m/m expected

France final CPI for April: +4.8% y/y, inline with preliminary read

CHF Pairs

Overlay of CHF Pairs: 1-Hour Forex Chart

Overlay of CHF Pairs: 1-Hour Forex Chart

Swiss PPI up by 1.3% vs. projected 0.9% gain, previous 0.8% increase

CAD Pairs

Overlay of CAD Pairs: 1-Hour Forex Chart

Overlay of CAD Pairs: 1-Hour Forex Chart

Canadian building permits: -9.3% in March vs -8.0% forecast

Bank of Canada Governing Council Member Gravelle said on Thursday that the 1% policy rate is ‘too stimulative.’

NZD Pairs

Overlay of NZD Pairs: 1-Hour Forex Chart

Overlay of NZD Pairs: 1-Hour Forex Chart

New Zealand Credit Card sales in April: +7% m/m vs. -1.3% prior

New Zealand quarterly inflation expectations up from 3.27% to 3.29%

New Zealand Finance Minister Robertson pushed back against recession talk on Thursday

New Zealand Manufacturing PMI slipped from 53.8 to 51.2 in March – BusinessNZ

AUD Pairs

Overlay of AUD Pairs: 1-Hour Forex Chart

Overlay of AUD Pairs: 1-Hour Forex Chart

Australian NAB business confidence index down from 16 to 10 in April

Australia weekly consumer confidence survey ticked lower to 90.5 vs. 90.7 previous

Australian MI inflation expectations down from 5.2% to 5.0%

Reserve Bank deputy governor Michele Bullock warned that more regulation is needed after Terra protocol meltdown

JPY Pairs

Overlay of Inverted JPY Pairs: 1-Hour Forex Chart

Overlay of Inverted JPY Pairs: 1-Hour Forex Chart

Japan’s real wages down 0.2% in March, declining for the first time in three months

Japan leading indicators index increased to 101.0 in March from an upwardly revised 100.1 previous

Bank of Japan Summary of Opinions: stimulus program must be maintained as they still view any pick up in inflation as temporary

Japan’s current account surplus grew +69B yen to 2.55T yen in March

Japan Economy Watchers Survey rose 2.6 to 50.4 in April as covid restrictions lifted

Japan household spending in March ticked lower to 2.3% y/y, 1.8% q/q