FXTM information and reviews
FXTM
93%
OctaFX information and reviews
OctaFX
92%
XM information and reviews
XM
91%
FXCC information and reviews
FXCC
90%
Libertex information and reviews
Libertex
89%
FxPro information and reviews
FxPro
88%

Stocks extend gains, dollar retreats as recession angst tempered


21 June 2022 Written by Raffi Boyadjian  XM Investment Analyst Raffi Boyadjian

The market turmoil sparked by last week’s round of central bank rate hikes receded further on Tuesday, as worries about a recession were put on hold while investors weighed the risks ahead of some key data and a congressional testimony by Fed Chair Jerome Powell. European stocks were headed for a second day of gains and Asian markets were mostly higher, with Wall Street futures also pointing to a solid open when US traders return from their long holiday weekend.

Equities stage a cautious rebound

Nothing much has changed since last week surrounding expectations about central bank tightening or signs that inflationary pressures may be moderating. Recession is still the foremost concern for investors, so this week’s rebound in equity markets looks more like a technical correction following the heavy selling over the course of the previous two weeks.

The pause in the bond rout is also likely aiding sentiment as yields settle below the recent highs. The 10-year US Treasury yield came close to breaching 3.5% after the Fed hiked rates by a bigger-than-expected 75 basis points last Wednesday.

Plenty of risks ahead

Powell will be speaking before both chambers of Congress on Wednesday and Thursday and may signal that more aggressive rate increases will be needed to combat stubbornly high inflation. Crucial PMI data for June, as well as inflation numbers for the UK, Canada and Japan are due this week too. Hence, this may just be the calm before the next storm.

Aside from the anxiety around the pace of monetary tightening, investors also have to grapple with the threat of snap lockdowns in China amid new outbreaks in the south of the country, including the tech hub of Shenzhen.

Euro powers ahead, yen still in danger zone

In FX markets, safe havens were retreating and riskier currencies were recouping lost ground. The US dollar backed further away from last week’s two-decade peak against a basket of currencies and the yen and Swiss franc were weaker too. The greenback slipped versus the franc but held firm against the yen, which continued to hover dangerously around the 135 level.

Fresh lows for the yen seem more likely than not after the Bank of Japan refused to change its ultra-accommodative stance at its meeting last Friday. In contrast, the European Central Bank is getting ready to lift rates and Chief Economist Philip Lane signalled yesterday that although the size of the July rate hike is set at 25 bps, a bigger increase is possible in September if there are more upside surprises in inflation.

The euro was last trading up almost 0.5% to rise to around $1.0555. Some reassurances by President Christine Lagarde on Monday on the ECB’s determination to prevent fragmentation in the Eurozone bond market are also likely adding to the euro’s positive momentum.

Pound and aussie make progress too

The pound was up too, testing the $1.23 handle and drawing support from relatively hawkish remarks by the Bank of England’s Catherine Mann. Investors are sensing some inklings of a hawkish shift by the BoE and Mann was one of three MPC members that dissented to vote for a 50-bps hike.

Furthermore, both Mann and Chief Economist Huw Pill, who spoke earlier today, have cited the exchange rate as a cause for concern when it comes to the inflation risks.

The Australian dollar was another strong gainer, though it lagged the Canadian dollar, which was today’s biggest winner, firming to around C$1.2910 ahead of domestic retail sales figures expected later today. The aussie, meanwhile, along with the kiwi, was benefiting from the improved risk sentiment. But its advances were capped by RBA Governor Philip Lowe, who played down the prospect of rate rises bigger than 50 bps in a speech earlier today.

By XM.com
#source

Share:


Related

Dollar smiles after impressive jobs data reinforces Fed bets
Dollar smiles after impressive jobs data reinforces Fed bets

Despite several leading indicators warning about a loss of momentum in the US economy, the labor market is still firing on all cylinders according to the latest jobs report...

8 Aug 2022

Stocks drift, dollar firms as markets brace for US jobs slowdown
Stocks drift, dollar firms as markets brace for US jobs slowdown

Recession jitters were abound on Friday even as markets got off to a steady start following a few wobbles along the week. PMI indicators around the world painted a grim picture for services activity, suggesting major economies...

5 Aug 2022

Wall Street bounces, shrugs off Taiwan tensions and hawkish Fed
Wall Street bounces, shrugs off Taiwan tensions and hawkish Fed

Geopolitical tensions and recession fears appear to have faded into the background for investors as shares on Wall Street staged another impressive rally on Wednesday...

4 Aug 2022

Fed hawks lift yields out of the doldrums, yen pauses for breath
Fed hawks lift yields out of the doldrums, yen pauses for breath

Bond markets were reeling and interest rate futures were being recalibrated after Federal Reserve officials questioned the recent scaling back of rate hike expectations by investors...

3 Aug 2022

US-China tensions dent appetite as yields crumble, dollar creeps higher
US-China tensions dent appetite as yields crumble, dollar creeps higher

Risk sentiment took a knock on Tuesday as it emerged that the Speaker of the US House of Representatives Nancy Pelosi is on her way to Taiwan, defying China’s strong advice against...

2 Aug 2022

Crude Oil Is Afraid of Geopolitics
Crude Oil Is Afraid of Geopolitics

The commodity sector remains rather tense on Monday; Brent is trading at $102.75. Global geopolitics is what investors are focused on right now. Any complications in this area muddy the water...

1 Aug 2022


Forex Forecasts

HFM information and reviews
HFM
87%
IronFX information and reviews
IronFX
86%
FXCM information and reviews
FXCM
85%
Pepperstone information and reviews
Pepperstone
84%
NordFX information and reviews
NordFX
83%
LegacyFX information and reviews
LegacyFX
82%

© 2006-2022 Forex-Ratings.com

The usage of this website constitutes acceptance of the following legal information.
Any contracts of financial instruments offered to conclude bear high risks and may result in the full loss of the deposited funds. Prior to making transactions one should get acquainted with the risks to which they relate. All the information featured on the website (reviews, brokers' news, comments, analysis, quotes, forecasts or other information materials provided by Forex Ratings, as well as information provided by the partners), including graphical information about the forex companies, brokers and dealing desks, is intended solely for informational purposes, is not a means of advertising them, and doesn't imply direct instructions for investing. Forex Ratings shall not be liable for any loss, including unlimited loss of funds, which may arise directly or indirectly from the usage of this information. The editorial staff of the website does not bear any responsibility whatsoever for the content of the comments or reviews made by the site users about the forex companies. The entire responsibility for the contents rests with the commentators. Reprint of the materials is available only with the permission of the editorial staff.
We use cookies to improve your experience and to make your stay with us more comfortable. By using Forex-Ratings.com website you agree to the cookies policy.