Spreadex Market Update
USD Back on Top As US CPI Hits Highest Since 1981
USD rally continues today as Friday’s CPI beat reinforces Hawkish Fed view. Equities fall on global recessionary fears as central bank tightening and excessive inflation combine. JPY rallies on stronger safe-haven demand. GBP hit by a string of weaker-than-expected UK data, BOE in focus this week. Commodities fall on rising USD.
Key Factors for Today
- USD higher as upside inflation beat puts pressure on Fed
- Equities plunge on global recession fears
- JPY leading FX on safe-haven demand
- GBP falls on slew of weak data
- Gold reversed Friday’s gains
- Oil falls back as USD rallies
Coming Up
Quiet data schedule today following UK data this morning
- GBP UK NIESR GDP estimate
- USD Fed’s Brainard speaks
- EUR Italian unemployment date
Fed Hawks Back In Control Following CPI Beat
The US Dollar starts the week on a strong footing following Friday’s upside CPI beat. The Dollar Index is now up over 3% from the May lows. On Friday, May CPI was seen coming in above expectations, sharpening the focus on this week’s FOMC meeting. With inflation having bounced back from the softer reading seen over the prior month, the case for the Fed pausing after the projected July hike has now been heavily diluted. At 8.6% annually, headline inflation is now the highest it’s been in the us since 1981.
Risk Sentiment Rocked by Recession Fears
Equities markets are starting the new week with a heavily offered tone. Asset markets are trading lower across the board over the European open on Monday as the rise in USD, and hawkish Fed expectations, create a drag on sentiment. The Dax and FTSE are down over 6% and 5%, respectively, from recent highs. Expectations for further tightening this week from the Fed and BOE are likely to keep risk assets under pressure moving forward.
JPY Rallies on Safe-Haven Inflow
In FX, JPY has been the strongest performer over late Asian and early European trading on Monday. The reversal lower in risk appetite is helping drive safe-haven inflows to JPY. GBP and EUR have been among the weakest performing currencies on Monday. Growth concerns in the face of ECB & BOE hawkishness are having a dampening impact on both currencies here.
GBP Falls Following UK Data Flop
GBP has come under greater pressure today following a slew of weaker-than-expected data this morning. Monthly GDP, industrial production and manufacturing production all came in below estimates, further emphasising growth concerns for the UK.
Gold Gives Up Gains
It’s been a weak start for the metals market on Monday. Both gold and silver are under pressure as USD runs rampant. On Friday, gold saw a strong reversal higher as traders reacted to news of record US inflation. However, with firmly hawkish Fed expectations setting the tone this week, metals have since reversed lower again.
Oil Under Pressure from USD Rally
Oil prices are under pressure across the European open on Monday, weighed on by a stronger US Dollar. Crude futures are now down almost 4% from their recent highs. While focus is still on market tightness and ongoing supply disruptions, USD heading back towards highs is taking centre stage for now.
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