Spreadex Market Update
Equities tank while USD Falls As May PCE Misses
The US Dollar slumped yesterday in response to a weaker-than-expected May Core PCE reading.
Ahead of the release, the Dollar had been riding high, bolstered by comments mid-week from Fed chairman Powell who reassured investors that the US economy was resilient enough to ward off a recession, emphasising the need to continue tightening to tame inflation.
Yesterday’s data has given some pause for thought, however, given that PCE is the Fed’s preferred gauge of inflation. Today, traders await the release of the June ISM manufacturing number which is expected to have softened on the month.
Key Factors for Today
- USD slipped on weaker-than-expected core PCE yesterday – still higher on week – focus now on today’s ISM manufacturing
- Equities plunge across the board on hawkish central bank signals & recession fears
- JPY firmly higher on safe-haven demand, AUD the weakest currency on Friday
- Silver hits fresh 2022 lows, gold breaks key support
- Oil falls on OPEC production increase news
Coming Up
- EUR/GBP Eurozone and UK PMIs
- EUR Eurozone CPI estimate y/y
- USD US ISM Manufacturing Index
Equities Tank on Hawkish Central Bank Focus
The European open on Friday marks a sea of red across the equities landscape. Despite the softness in USD yesterday, equities markets are reacting to the aggressively hawkish signals we’ve received from central bankers this week which have resharpened the focus on growth concerns across the remainder of the year. The DAX is trading close to 2022 lows while the Nikkei is down over 5% on the week. The Nasdaq is sitting around 7% lower on the week.
JPY Surges on Safe-Haven Demand, AUDUSD Hits Fresh 2022 Lows
In FX, JPY has seen a sharp influx of safe-haven demand overnight with the currency once again the strongest performer over late Asian and early European trading on Friday. With risk assets tanking, JPY sentiment has reversed heavily following a muted showing over much of the week. Naturally, risk-linked currencies have been the worst performers with AUD the weakest currency on Friday. AUDUSD is currently trading at fresh 2022 lows on the back of this sell-off.
Silver Hits Fresh 2022 Lows, Gold Breaks Support
Metals prices are finally starting to show some directional skew here. Both gold and silver are trading lower today with gold breaking through key support and silver trading at fresh 2022 lows. The broad move higher in USD this week, as well as hawkish signals from Fed’s Powell, has proven enough to finally unseat the metals market.
Oil Falls As OPEC Announces Quicker End to Production-Cut Unwind
Oil prices are seeing heavy selling pressure on Friday with crude futures now down over 7% on the week. The catalyst behind the move was yesterday’s announcement from OPEC that it will step up oil production in coming months. The cartel announced that it will hike production by 650k barrels per day over the next two months, bringing forward the end of the unwinding of its pandemic-era production cuts.
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