Daily Wrap Up 09 May 2022

9 May 2022 04:16 PM

Bears rule the roost, dollar jumps

Stock markets are enduring large losses due to concerns about rising inflation, higher interest rates and the war in Ukraine. Last week, the Reserve Bank of Australia, the Federal Reserve and the Bank of England hiked interest rates. The central banks all cited rising inflation as a motivation behind the hikes. Now the cost of borrowing has increased in those countries, that will compound the cost-of-living issue. When costs are high for a prolonged period, that can chip away at demand as people have less disposable income. Even though the European Central Bank have not hiked rates since 2011, there are growing calls for the bank to raise rates in July. This comes at a time when it seems the eurozone economy is stagnating. Last Thursday, the Bank of England set the cat amongst the pigeons as they also predicted the UK economy will contract by 0.25% next year. There are growing worries the global economy is moving down a gear.

Also playing on traders’ minds is the ongoing conflict in Ukraine. Russian President, Vladimir Putin, was speaking in the Victory in Europe celebration in Moscow, and he claimed that Western forces are preparing to invade Russia. The rhetoric used by Mr Putin suggests he is not in any mood to enter peace talks soon, and that is adding to the ongoing uncertainty in Eastern Europe. The CAC 40 has fallen the furthest in Europe as it is down almost 2%. Once again, the NASDAQ 100 is leading the declines in the US it is down 3% as tech stocks have fallen out of favour.

The US dollar is experiencing a lot of volatility as it has swung back and forth today. Now, the greenback is up over 0.2%. As a result, EUR/USD and GBP/USD are down. USD/JPY is higher, which says a lot about the strength of the dollar, as EUR/JPY, GBP/JPY and AUD/JPY are all in the red. The wider risk-off mood in the markets is driving up demand for the Japanese yen as its safe-haven status is ensuring its popularity. Commodities are having a tough time due to speculation about dwindling demand levels. Industrial metals, like copper, silver, and platinum are lower. Oil is offside too as China confirmed its oil imports in the first four months of the year fell by 4.8% - the lockdown in Shanghai is not helping the situation.

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