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19th May 2022 – Navigate Global Payments, Markets Today

MARKET WRAP – 19th May 2022

  • It was very risk-off on Wednesday with stocks slaughtered as major indices closed lower by 3.5-5% and the VIX rising above 30 while the Nasdaq underperformed as Tech and Consumer Discretionary took a beating after the worrying Target (TGT) earnings

 

  • Global inflation concerns sent Wall Street nose-diving and pushed the greenback higher across the board

 

  • US stocks suffered heavy losses on Wall St’s worst day in nearly two years in which the Dow Jones slumped by over 1,100 points and the S&P 500 slipped back beneath the 4,000 level with retailers hit after poor earnings from Target due to rising costs.

 

  • The AUD/USD pair accelerated its slump after breaking below the 0.7000 threshold, now trading in the 0.6950 price zone.

 

 

  • The Dollar and Yen were also supported on safe haven flows, while EUR and Emerging currencies and activity currencies took a hit. Crude prices tumbled in fitting with risk sentiment and a stronger Dollar.

 

  • Meanwhile, Fed speak saw Evans and Harker both mention two more 50bps hikes before reverting to a more measured approach of 25bps, which appears to be the consensus among the Fed currently.

 

  • US Housing data was mixed, building permits fell slightly less than expected while housing starts fell by more than expected.

 

FX

  • USD – The dollar rose on Wednesday, breaking its three-session losing streak, as concerns about the outlook for global economic growth and rising inflation knocked sentiment a day after Fed Chair Powell struck a more hawkish tone, reaffirming the Fed’s commitment to tackle high levels of inflation.

 

  • GBP – The pound sold-off on Wednesday as CPI data showed inflation reached a 40-year high of in April – more than four times the Bank of England’s 2% target.

 

  • Overnight AUD saw some selling pressures in wake of the Australian Wage Price Index, which came in at 0.7%, a touch beneath the 0.8% expectation.

 

  • ANZ Bank recently noted that a 40bps RBA hike in June will likely be discussed but stated that Wage price index of +1.0% would be needed to trigger a 40bps move.

 

  • Canada and UK saw inflation reports, where the UK CPI rose to 9.0% from 7.0% YIY in April, but it was a touch beneath the 9.1% expectation, but core CPI Y/Y was in line with expectations.

TODAY’S KEY RISK EVENTS

  • Japanese Machinery Orders & Trade Data
  • Australian Employment Change & Unemployment Rate – Markets expect a beat at 3.9% vs previous 4.0%
  • New Zealand Annual Budget
  • US Jobless Claims

 

CURRENCY/INDICIES RANGES
Currency Pair Low High
AUD/USD 0.695 0.7046
EUR/USD 1.046 1.0564
GBP/USD 1.233 1.2501
USD/JPY 128.005 129.535
NZD/USD 0.6292 0.63695
USD/CAD 1.27955 1.2896
USD/CNH 6.7371 6.7856
AUD/JPY 89.05 91.16
AUD/NZD 1.1025 1.106
DXY 103.194 103.931

 

 

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