US Dollar Hedges Against Other Major Currencies LeapRate

Forex

The US dollar hedged against other major currencies at the start of Wednesday’s session, but remains close to a 20-year high reached earlier in the week. Markets believe the Federal Reserve will stick to its determined tightening of monetary policies as inflation and its reasons, such as a tight labor market, high energy costs and ongoing supply chain issues, remain a source of concern. The release of US inflation data for April later today could lead to further dollar gains, but is unlikely to trigger substantial losses; a surprising upside figure will raise market bets on a 0.75% rate hike and boost demand for the dollar, while a below-expected figure is unlikely to alter the Fed’s plans for the coming months .

Ricardo Evangelista – Principal Analyst, ActivTrades

Daily Market Commentary

Gold

Gold prices rebounded after hitting a 2-month low early in Wednesday’s session. The price of the precious metal is suffering due to its inverse correlation with the US Dollar, which is currently hovering near a 2-decade high hit earlier in the week. With US inflation data for April due later today, there could be further downside for gold as a surprising upside number, which in this case will be above 8.1%, could rise. market bets on more Fed tightening and further strengthening of the dollar. On the other hand, the scope for dollar losses is limited because even if the inflation data surprises on the downside, the Fed is still expected to stick to its current plans for back-to-back 50 basis point hikes in June and July.

Ricardo Evangelista – Principal Analyst, ActivTrades

European stocks

European stocks followed the Asian bull trend overnight, pushing benchmarks higher alongside Treasuries as risk aversion eased overnight. Today’s bullish pressure came from China after investors hailed improvements on the virus front, with cases declining, raising hopes for reduced restrictions and an impact on the growth. Meanwhile, investors’ attention is now slowly turning to inflation, with the much-anticipated US CPI numbers due later in the afternoon. While no significant change is expected, today’s inflation is seen as crucial by many as investors are desperate to figure out where the rising price will go. A higher-than-expected CPI would be concerning and would pave the way for further monetary tightening, putting additional pressure on riskier assets. On the other hand, a lower number could be taken as evidence that inflation has peaked, raising hopes for a less aggressive approach from the Fed that would benefit stocks and bonds. For now, most analysts are anticipating a moderate drop in price pressure in April, but with the figure still above 8%.

Pierre Veyret– Technical Analyst, ActivTrades


Disclaimer: Opinions are personal to the authors and do not reflect the opinions of LeapRate. This is not business advice.

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