Risk-aversion returns to the table ahead of PMIs, central bankers’ speeches

Financial markets affected by news on May 24 2022

Market sentiment sours after the rosy start of the week as fears of inflation and growth, especially linked to China, renew the rush flight to safety. Also roiling the mood is the hawkish Fedspeak and chatters surrounding Sino-American tussles, be it relating to trade or Taiwan.

The risk-off mood couldn’t recall the US dollar buyers but weighed on commodities, as well as Antipodeans. Among them, AUDUSD and NZDUSD dropped the most on softer data while the USDCAD bounced off a two-week low on downbeat crude oil prices, Canada’s key export. 

Even so, gold remains mildly bid as traders reassess the metal’s traditional risk-safety status.

Elsewhere, BTCUSD and ETHUSD also consolidate the previous day’s losses on news from eBay and one of.

It’s worth noting that multiple top-tier data/events keep the markets cautious with eyes on Fed’s Powell.

Following is the list of major assets’ latest performances:

  • Brent oil snaps three-day run-up to print 0.80% intraday losses around $112.50.
  • Gold rises for the fifth consecutive day, near the fortnight high, up 0.35% daily at around $1,860 at the latest.
  • USD Index remains offered around a two-week low, down 0.25% near 101.80 of late.
  • FTSE 100 drops 0.30% intraday whereas DAX and EUROSTOXX50 both lose around 0.60% daily by the press time.
  • Dow Jones and S&P 500 rose 1.98% and 1.86% while Nasdaq gained 1.59% amid an optimistic US session on Monday.
  • BTCUSD remains below $30,000 despite rising 1.0%, ETHUSD also adds 0.50% on a day but fails to regain $2,000.

US dollar fails to justify safe-haven appeal ahead of Fed’s Powell

Growing concerns about China’s economic health join the US chit-chat for phase one deal and tariffs, not to forget the Taiwan issue, to weigh on the market sentiment during early Tuesday. Pessimism surrounding the world’s largest commodity user drowned Antipodeans and commodity prices, among which crude dropped the most as the EU oil embargo appears in limbo.

Also acting as the risk-off catalysts were hawkish comments from the representatives of the San Francisco Fed and  Kansas City Fed, namely Mary Daly and Esther George in that order. Furthermore, traders’ anxiety ahead of the key PMIs for May and speech from Fed’s Powell seem to also weigh on the market sentiment.

Even so, the US Dollar Index (DXY) refreshed its two-week low as ECB President Christine Lagarde sounds more optimistic and braces for a July rate hike. Also drowning the greenback is the downbeat print of the US Treasury yields.

That said, equities in the APAC (Asia-Pacific) zone remain downbeat while those from Europe and the UK also fail to track Wall Street’s gains.

It’s worth noting that the cryptos cheer softer USD and hopes of further investment avenues, on the recent news from eBay and OneOf, to pare the week-start losses.

⏫ 🟢 Strong buy: AUDUSD, NZDUSD

⏬ 🔴 Strong sell: Nasdaq, silver

⬆️ 🟢 Buy: USD Index, gold, USDJPY

⬇️ 🔴 Sell: DAX, FTSE 100, brent oil, gold, ETHUSD, BTCUSD

Powell, PMIs to empower the markets

The first readings of the US S&P Global PMIs for May will be important, especially after German PMIs improved and ECB President Lagarde shrugged off recession fears. Also important for the markets will be how Fed Chair Jerome Powell considers the recently mixed economics from the US to justify his 50 bps rate hike bias. Should the policymaker fails to do so and highlights the need for aggressive tightening, the US dollar could reverse the latest losses, which in turn might recall the gold sellers and exert additional downside pressure on the Antipodeans as well as other commodities.

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