21 April 2022 – Daily FX Update

Overview

Dollar index weakens

Euro gains grounds

Oil in supply and demand shock

Gold hovers above $1,950

FOREX

U.S. Dollar Index

The U.S. dollar edged lower in early European trade Thursday as the world’s key finance ministers meet, but expectations for aggressive Federal Reserve monetary tightening keep it elevated. Benchmark 10-year U.S. Treasury yields have pulled back from the highest level since December 2018 at close to 3%, helping the dollar to hand back some recent gains.

The Dollar Index traded 0.3% lower at 100.165, retreating from the more than the two-year peak of 101.03 seen earlier in the week.

Japanese Yen (USDJPY)

The U.S. dollar hit a two-decade high of 129.430 against the yen on Wednesday, after the Bank of Japan (BOJ) stepped into the bond market for the third time in three months to defend its zero-percent yield target. However, the pair traded up 0.48% to 128.50 during the early sessions.

 The central bank offered to buy unlimited amounts of 10-year Japanese government bonds for four consecutive sessions on Wednesday ahead of handing down its policy decision in the following week.

Euro (EURUSD)

The euro perked up to a one-week high on Thursday as market expectations solidified for a first interest rate hike from the European Central Bank as early as July. Joachim Nagel, president of Germany’s Bundesbank, joined fellow policymakers this week in saying the ECB could raise interest rates at the start of the third quarter.

Against the U.S. dollar, the euro rose 0.4% to $1.0895 and its highest level since April 14. The euro’s rise was quite broad-based, with the currency chalking up gains versus the yen, Swiss franc, and Norwegian crown.

Indices

U.S. indices

U.S. stocks ended in mixed territory on Wednesday. Thus, the Dow Jones Industrial Average ended higher for the second straight day, the S&P 500 was flat, and the Nasdaq Composite fell sharply.

U.S. Treasury yields dipped after hitting three-year highs as buyers emerged. Benchmark 10-year yields were last at 2.8436%, after reaching the highest since December 2018. The Dow ended up 0.71%, while the S&P 500 fell 0.06% and the Nasdaq dropped 1.22%.

European Indices

European stock markets opened marginally higher. Meanwhile, investors tracking developments in Ukraine and the French presidential campaign.

European Central Bank President Christine Lagarde taking part in a panel discussion at the IMF-World Bank meeting later Thursday, along with Fed Chair Jerome Powell. Her comments will be studied carefully for clues about future monetary policy after the Eurozone consumer price index soared to 7.5%, from 5.9% the previous month.

The DAX futures traded 0.4% higher, CAC 40 futures climbed 0.3% and the FTSE 100 futures rose 0.3%.

Asia-Pacific Indices

Asia Pacific stocks were mixed on Thursday morning, while U.S. equity futures were on an upward trend, as a continuous debate around whether inflation is peaking saw a rally in U.S. Treasuries.

Japan’s Nikkei 225 jumped 1.16%, and the Australian ASX 200 edged up 0.19%. Meanwhile, Hong Kong’s Hang Seng Index was down 0.40%. China’s Shanghai Composite edged down 0.11%.

Metals

The war in Ukraine remains the major threat in the market, as investors can not see an improvement in the political talks. On the other hand, G7 finance ministers announced plans to provide additional support to Ukraine of at least $24 billion for 2022 and beyond.

European Central Bank President Christine Lagarde is taking part in a panel discussion at the IMF-World Bank meeting later Thursday, along with Fed Chair Jerome Powell. Market participants await these speeches and looking to find more clues about the monetary policy of each central bank.

Additionally, gold futures fell 0.2% to $1,951.00, while Spot gold fell 0.25% to $1,954.7 an ounce.

Crude Oil

Oil prices rose on Thursday as concerns about supply due to a potential European Union (EU) ban on Russian oil came to the fore, days after diminished supplies from Libya rocked the market. In fact, Libya said the country was losing more than 550,000 barrels per day of oil output due to blockades at major fields and export terminals.

The demand outlook in China continues to weigh on the market. However, the world’s biggest oil importer slowly eases strict COVID-19 curbs that have hit manufacturing activity and global supply chains.

Brent crude futures rose 1.24% to $108.12 a barrel, while U.S., while WTI crude futures gained 1.23% to 103.45 a barrel.