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Hawkish Fed, Stocks Sink, Dollar Gains, Yields Higher


7 April 2022 Written by Stuart Cowell  HF Markets Head Market Analyst Stuart Cowell

FED Minute Highlights - "Many" members see “one or more” 50bp rate hikes, agree balance sheet sell-off at $95 bln/mth (may start in May). “Many” also wanted 50 bps hike in March. Stocks tank (NASDAQ) -2.2% worse performer – Asian shares & European FUTS lower. Yields perked up again, OIL fell to 3-week low and GOLD rotates at key support level.

Overnight – AUD AIG Services Index misses (56.2 vs 60.0) and Trade balance shrinks significantly (7.46b vs 11.79b) to 11-mth low. Japan’s leading index came in at a 5-mth low. 

German  Industrial production better than expected (0.2% vs 0.1%)  but BIG revision last month, down to 1.4% from 2.7%. UK House price inflation leaps to 1.4% from 0.5% (Average prices rose 11% y/y) as cost of living rises to 54-yr high.

European Open – The German 10-year Bund yield is down -1.8 bp at 0.625%. Bonds sold off yesterday on FOMC minutes, but while the Fed laid out a plan towards accelerated tightening, including a paring of the balance sheet, it seems much of that was already priced in and the minutes didn’t prompt a further inversion of the U.S. curve.

For the Eurozone the picture is somewhat different, and peripherals continue to underperform, which will leave ECB chief economist Lane wishing back the PEPP program as he frets about market fragmentation. DAX and FTSE 100 futures are up 0.3% and 0.1% respectively. Today – EZ Retail Sales, US Weekly Claims, ECB Minutes (March), Fed’s Bullard & Evans, BoE’s Pill.

Biggest FX Mover @ (07:30 GMT) EURAUD (+0.51%) Continues to rally off 1.4330 lows this week. Next resistance 1.4600. MAs aligned higher, MACD signal line & histogram higher & over 0 line, RSI 74, OB but rising, H1 ATR 0.0026, Daily ATR 0.0163.

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