April 7th – Daily FX Fundamental Update

FOREX

US dollar index (USDX)

The U.S. dollar was lower in early trade today but remained close to a two-year high after minutes from the last Federal Reserve (Fed) meeting showed policymakers were preparing to move aggressively to head off inflation. The Dollar Index traded 0.1% lower at 99.520, just below Wednesday’s high of 99.78 which was its highest since May 2020. While the minutes’ scope was largely within expectations, the Fed’s decision to move quickly and aggressively to handle inflation gave the dollar a boost.

EURUSD-GBPUSD

The shared currency gained 0.2% to 1.0918, amid recording a one-month low of 1.0874 as fresh sanctions were imposed on Moscow. The European Central Bank’s (ECB) last meeting minutes are due later today and are unlikely as hawkish as the Fed’s. Meanwhile, ECB has to cope with slumping growth in the wake of the Ukrainian war even as Eurozone inflation soared to a record high of 7.5%. Furthermore, the sterling pound rose 0.2% to 1.3086 as

Asia-Pacific

USD/JPY fell 0.1% to 123.70, near a one-week high, AUD/USD fell 0.3% to 0.7491, while USD/CNY was largely unchanged at 6.3612.

Indices

United States

Stocks fell Thursday amid the Federal Reserve (Fed) outlined plans to reduce its spending by more than $1 trillion a year while hiking interest rates. This plan is supposed to restrain inflation that could negatively affect economic growth. The minutes signaled the possibility of a 50 basis points increase, while the Fed is considering reducing its bond holdings at a pace of $95 billion a month to tighten financial conditions. The Dow Futures contract was down 0.5%, S&P 500 Futures traded 0.7%, lower, while Nasdaq 100 Futures dropped 1.1%.

Europe

European stock markets are expected to open lower Thursday, resuming the sharp losses from the previous session. Furthermore, investors were wary after Fed policymakers indicated the need for tighter monetary policy to handle inflation. The German DAX futures traded 0.2% lower, CAC 40 futures dropped 0.4%, while the FTSE 100 futures fell 0.1%.

Asia-Pacific

Asian stocks were down this morning as Fed revealed plans to hike rates and pare its balance sheet. Hong Kong’s Hang Seng Index inched down 0.1%, China’s Shanghai Composite was down 0.4%, while Japan’s Nikkei 225 slid 1.81%.

The ASX 200 was down 0.59% in Australia, with the Australian Industry Group services index at 56.2 in March 2022. Trade data for February 2022 also showed that exports grew 0% month-on-month, imports grew 12% month-on-month, and the trade balance was AU$7.457 billion ($5.63 billion).

Metals

Gold was up this morning in Asia, while the dollar remained near a two-year high amid the U.S. Federal Reserve maintained its hawkish stance in the minutes from its latest meeting. The benchmark U.S. 10-year Treasury yield was close to the multi-year highs hit in the previous session. However, gold futures inched up 0.01% to $1,923.30.

Meanwhile, silver prices eased by 0.2% to $24.4 as rising inflation counters downward pressure. Platinum inched down 0.1%, while palladium gained 0.5%.

Energy

Crude oil prices edged up during the early trades after touching their three-week low during the previous session. Black gold gained amid consuming nations announced a huge release of oil from strategic reserves, as worries over tight supplies still clouded the market outlook. International Energy Agency (IEA) members agreed to release 60 million barrels. Previously the U.S. announced a 180-million-barrel release to help drive down prices.

Brent crude futures climbed $1.42 to $102.52 a barrel, while U.S. West Texas Intermediate (WTI) crude futures rose $1.55 to $97.78 a barrel. Both benchmarks plunged more than 5% in the previous session and hit their lowest closing levels since March 16.