Spreadex Market Update
Dow smashed 1000 points lower. NFP Today
Thursday saw the biggest daily decline on Wall Street since 2020, with the Nasdaq tanking 5% and the Dow losing over 1000 points. Growing fears of a recession in the US, as well as globally are hurting investor appetite.
The key focus for traders today will be the release of US labour market data for April. The US Dollar is trading higher ahead of the release largely as a result of increased safe-haven inflow amidst falling US equities prices. Today’s releases have the potential to further amplify this dynamic if we see market estimates undershot.
Key Factors for Markets Today
- GBP sinks on BOE Recession warning
- Risk appetite weakened on growth concerns
- Oil and gold hurt by stronger US Dollar
Coming Up Today
- US labour reports (NFP, unemployment rate, average hourly earnings)
- Canadian employment reports (unemployment rate, employment change)
GBP Sinks as BOE Hikes Rates, Warns of Coming Downturn
In FX, GBP has come under heavy selling following the May BOE meeting yesterday. GBPUSD sunk to its lowest level since June 2020 as traders reacted to pessimistic forecasts from BOE governor Bailey. The BOE hiked rates by .25% but warned of a “massive downturn” likely to take hold over the back end of the year, with inflation set to peak at 10%.
With energy prices rising and set to rise further, and UK consumers battling a broad cost-of-living crisis, the BOE warned that the hit to real incomes is unavoidable. However, governor Bailey explained that over the next two years this is expected to lead a self-correction in inflation.
Risk Markets Fall on Global Recessionary Concerns
Global equities prices are seeing fairly mixed trading on the back of this week’s developments. While the FTSE is higher on the back of a plunging pound, broadly speaking risk appetite has been weakened amidst heightened concern over the global growth outlook. With recessionary fears building, risk assets look likely to come under further pressure in the near-term.
US Dollar Rallies on Safe-Haven Inflows
With equities plunging amidst messages of concern from central banks, the US Dollar has gone on to break out to fresh highs this week. It seems that, despite hawkish expectations for the Fed, traders still deem the US economy to be best placed to ride out the coming storm. The latest set of US labour market indicators later today hold the potential to create further volatility. Any undershooting of market estimates, particularly on the back of the recent Q1 GDP miss, will no doubt underscore recessionary fears, weighing further on equities.
Gold & Oil Fall as US Dollar Rallies – OPEC Sticks to Plan
With the greenback rallying into the end of the week we’ve seen gold prices coming off sharply. Oil prices have come under pressure too. Yesterday’s OPEC+ meeting saw the group sticking to its plan of hiking oil output gradually, once again refusing to bow to external pressure to hike output at a quicker pace to combat rising energy prices. Despite the pull back, crude ends the week higher, supported by news that President Biden is looking to buy 60 million barrels of oil in a bid to replenish the US SPR reserves amidst ongoing releases.
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