25 April 2022 – Daily FX Update

Overview

French elections are over

Crude Oil is pressured lower

Gold to two weeks low

FOREX

U.S. Dollar Index

The dollar climbed on Monday as investors pursued security due to suspense over the global growth overlook. The dollar index rose 0.2% to touch the two-year peak of 101.33. Stock markets are in the red this morning, and that risk aversion has generally benefitted the dollar, and this is why the euro has been dragged a bit lower.

The Treasury market steadied, keeping the benchmark 10-year yield at 2.8581% and the two-year yield off last week’s highs at 2.6399%.

EURO

The euro fell 0.29% to $1.0778, after opening higher, closing to the two-year low of $1.0758 hit last week. However, it gained 0.12% against sterling, touching a one-month peak of 84.32 pence in early trade.

With 97% of votes counted, Macron was on course for a solid 57.4% of the vote, interior ministry figures showed. Markets had worried that a Le Pen victory would lead to significant economic change in the euro zone’s second-largest economy.

Sterling pound

Sterling fell 0.3% against the greenback to $1.28085, the lowest since September 2020. The Sterling pound decline was fueled by many factors, as the British retail sales and consumer confidence data were lower than expected. Furthermore, Bank of England (BOE) comments signaled a possible slowdown in the expected upward movement of interest rates.

Chinese Yuan

China’s yuan fell to a one-year low and extended the losses after posting its worst week since 2015. Market participants worry about the worsening economic growth outlook due to strict COVID-19 measures and lockdowns.

The People’s Bank of China (PBOC) set the midpoint rate at the lowest since August 2021 at 6.4909 per dollar prior to market open. Meanwhile, the Yuan hit its lowest rate since April 2021 in the spot trades.

Indices

U.S. Indices

U.S. stock futures fell on Sunday night amid a four-week losing streak for the Dow Jones Industrial Average as investors weighed the likelihood of rising interest rates. Dow Jones Industrial Average futures lost 0.1%, S&P 500 futures dipped 0.2%, while the Nasdaq 100 futures declined 0.2%.

Those moves come after a selloff on Friday, with the Dow dropping 2.8% to 33,811.40 in what was the Dow’s worst day since October 2020. Likewise, the S&P 500 fell 2.8% to 4,271.78, recording its worst day since March.

Asian Indices

Asian stocks fell the most in two weeks on Monday as concern about rapid U.S. rate rises and slowing growth rattled investors. The Japanese Nikkei fell 1.9%.

In Beijing, worrying about a strict lockdown after the emergence of a few cases, many have begun stockpiling food, with long queues seen in the largest district Chaoyang for the first of three mandatory tests scheduled there this week. While the virus so far seemed well contained in Beijing, authorities in Shanghai were trying to control the heightened frustration caused by the lockdown. Shanghai index shed 4.1% while Hong Kong’s Hang Seng fell 3%.

Metals

Gold prices fell on Monday to their lowest in four weeks amid bets for a hawkish U.S. Federal Reserve tightening. With expectations for a 50-basis point interest hike at the Fed’s May meeting now locked in, traders amassed bets that the U.S. central bank will go even bigger in subsequent months.

Spot gold was down 0.7% at $1,916.41 per ounce, hitting its lowest since March 29 at $1,914.58. Similarly, the U.S. gold futures were down 0.9% at $1,917.40.

Spot silver dipped 1.7% to an over two-month trough of $23.73 per ounce, while palladium fell 3.1% to $2,302.19. Platinum eased 0.8% to $923.00, its lowest since mid-December last year.

Crude oil

Oil prices slumped to near two-week lows during the early trades to extend losses from last week. Additionally, market concerns grew about prolonged COVID-19 lockdowns in Shanghai and potential U.S. rate hikes that would hurt global economic growth and fuel demand.

Brent crude futures were down $3.15 to $103.50 a barrel after touching the lowest price in two weeks at $103.41. Likewise, U.S. West Texas Intermediate (WTI) crude futures fell to $99.06 a barrel, having skidded earlier to $98.93, the lowest since April 12. Both benchmarks lost nearly 5% last week on demand concerns.