20 April 2022 – Daily FX Update

Overview

Japanese Yen near 130

Gold edges lower

Inflation is Japan’s hope

Global growth rates drop

FOREX

U.S. Dollar Index

The U.S. dollar slid lower in early trades but remained strong. Additionally, Federal Reserve (Fed) officials pointed to upcoming hefty interest rate hikes. The U.S. Dollar Index traded 0.2% lower at 100.795 during the early trades.

The Federal Reserve’s meeting in early May is the most important upcoming event in the market. It is expected that the central bank will hike more aggressively than it announced at its March meeting. Meanwhile, U.S. Treasury yields pushed higher, with 10-year yields touching 2.981% for the first time since December 2018.

The Japanese Yen

Bank Of Japan (BoJ) offered to buy an unlimited amount of Japanese government bonds on Wednesday. Furthermore, BOJ attempts to keep its 10-year yields from breaking through its 0.25% ceiling.

As a result, USDJPY climbed to 129.40 for the first time since April 2002. Later on, the pair edged to 128.70 after Japanese Finance Minister railed against a weakening currency.

The Euro

The European currency gained0.2% to 1.0810, climbing off multi-month lows against the dollar. However, the Euro remains under the impact of the war in Ukraine. The uncertainty surrounding the French presidential election also weighing on the single currency.

This debate could be decisive in the tight race to decide who will run the country for the next five years, with any signs of a Le Pen victory likely to pressure the euro given her anti-EU stance.

Indices

U.S. indices

U.S. stocks surged Tuesday amid stronger-than-expected corporate earnings. However, the tech-heavy Nasdaq led the way for gains in U.S. markets, as many corporations reported stronger-than-expected earnings. Those reports helped investors shake off warnings from experts of a slowdown in global growth rate, which weighed on other sectors like bonds and oil.

The Federal Reserve looks set to raise its interest rate by 50 basis points when it meets next month, and a 75 basis-point hike has not been ruled out as Fed officials scramble to curtail inflation. Furthermore, the benchmark 10-year Treasury yield was last at 2.942%, down slightly after hitting its highest levels in three years.

The Dow Jones Industrial Average rose 1.45%, the S&P 500 gained 1.61%, and the Nasdaq Composite jumped 2.15%.

European Indices

European stock markets edged higher Wednesday, but gains look tentative as investors monitor developments in Ukraine as well as French political uncertainty. The DAX 0.3% higher, the CAC 40 rose 0.5% and the FTSE 100 climbed 0.1%.

The turmoil encircling Russia’s invasion drove the International Monetary Fund (IMF) to cut its projections for the second time this year. The IMF forecasted global growth rate of 3.6% in 2022 and 2023, a drop of 0.8 and 0.2 percentage points, respectively.

Asia-Pacific Indices

Asia Pacific stocks were mostly down this morning, as the U.S. equity futures are also on a downward trend. Moreover, the IMF cut its global growth outlook, the Russian invasion of Ukraine, and China’s COVID-19 outbreak are weighing heavily on the equity markets.

Hong Kong’s Hang Seng Index was down 0.39% while China’s Shanghai Composite fell 0.59%. The People’s Bank of China kept its loan prime rates (LPRs) steady, with the one-year LPR at 3.7% and the five-year LPR at 4.6%. Meanwhile, Japan’s Nikkei 225 gained 0.49%, while the Australian ASX 200 was up 0.34%.

Metals

Gold prices fell to their lowest in almost two weeks, as the strong dollar and Treasury yields weigh the safe haven. U.S. Treasury yields hovered near multi-year highs, as investors prepared for the Federal Reserve to aggressively raise interest rates.

Spot gold was down 0.4% at $1,941.40 per ounce, after hitting its lowest since April 8, while U.S. gold futures fell 0.7% to $1,944.80. While in Other metals, spot silver dipped 0.8% to $24.96 per ounce, and platinum eased 1.5% to $976.47, while palladium rose 0.3% to $2,379.85.

Crude Oil

Oil prices rebounded from the previous session amid concerns about tighter supplies from Russia and Libya. Moreover, industry data showed a drop in U.S. crude inventories last week.

Brent crude futures rose 0.6% to $107.91 a barrel, while the front-month WTI crude futures contract rose 0.5% to $103.02 a barrel. Both benchmarks fell 5.2% in volatile trading on Tuesday after the International Monetary Fund (IMF) on Tuesday slashed its forecast for global growth by nearly a percentage point.

Russia produced about 300,000 bpd below its target in March at 10.018 million bpd, based on secondary sources, the report showed. Meanwhile, Libya’s National Oil Corporation declared force majeure at the Brega oil port on Tuesday, saying it did not fulfill its commitments to the oil market.