Spreadex Market Update
Powell on Watch Today – RBA Hikes Again
The US Dollar continued higher yesterday, dragging down FX majors across the board as traders continued to digest Friday’s jobs data and mull the implications for the Fed. Overnight, the RBA joined the tide of central banks tightening this month with a 25bps hike of its own. Along with the hike, the RBA signalled the likely need for further tightening in coming months in response to still-elevated global inflation. The meeting saw AUD well bid subsequently with traders now repricing RBA rate expectations from the lower point they had been at toward the end of last year.
Key Factors for Today
- USD starts a little softer, traders wait for Powell
- Equities lower yesterday amidst USD rally
- USD still leads in FX – EUR & GBP weakest
- Metals stabilise, crude turns higher
Coming Up
- GBP – BOE’s Ramsden & Cunliffe speak
- USD – Fed’s Powell speaks
- CAD – BOC’s Macklem speaks
Equities Traders Brace for Powell
Equities markets were mostly seen lower yesterday as a rampant USD hurt stock sentiment. Today, traders will turn their attention to Fed chairman Powell who speaks later. On the back of Friday’s data, the risk is that Powell takes a more hawkish tone which could send equities further lower today. Yesterday, we heard from ECB’s Holzmann and Mann who both reaffirmed the bank’s “higher for longer” message on rates. A similar message is expected from Powell today which should keep equities curtailed this week.
US Earnings Continue Following Big Tech Misses Last Week
US earnings season continues today though we have a much quieter sheet this week with the season having passed its peak. So far, around 70% of companies have posted better-than-forecast results, which is slightly below the 10-year average. Additionally, so far the blended earnings decline from S&P 500 companies is 5.3% which, if confirmed would mark the first negative quarter since Q3 2020.
Activision Tanks Despite Earnings Beat
Yesterday saw shares in Activision Blizzard gap lower and plunge by over 5% despite the company beating earnings estimates. Overall profit levels were down sharply on last year and investors were concerned by a sharp uptick in costs on the company’s balance sheet.
USD Still in Control
The US Dollar sees a slightly softer start today on the back of yesterday’s continued rally. Traders brace for the Fed chair to speak later today with risks pointed towards a hawkish message which should see USD continue higher near-term.
EUR & GBP Pulled Lower
EUR & GBP have been the worst hit so far from the uptick in USD. Both currencies traded lower on the back of the BOE & ECB meetings last week with traders more focused on gauging a potential end to respective tightening campaigns than focusing on the hikes still come.
Metals Stabilise, Oil Turns Higher
In the metals and commodities space, both gold and silver have stabilised this week following the heavy selling seen at the end of last week. Powell’s comments today present downside risks for metals in light of the potential for USD to move higher on any hawkish signals. Crude prices have turned higher this week following heavy selling last week. Expectations of a milder slowdown in the US on the back of last week’s better jobs data are
helping support crude prices here.
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