USD rallied sharply yesterday on ISM manufacturing meet and hawkish Fed comments. Risk sentiment rebound as Shanghai emerges from lockdown. BOC hikes rates by 50bps, signals need for more tightening to come. OPEC meet today and said to be considering banning Russia from OPEC+ agreement. ADP employment change will be the main data event today ahead of tomorrow’s NFP release.
Key Factors for Today
- Oil falls, OPEC meet today – said to be mulling banning Russia
- USD Rallies on better data and hawkish Fed comments
- UK markets closed for Queen’s Platinum Jubilee celebrations
- Shanghai emerges from 2-month lockdown
- CHF leading in FX
- BOC hikes rates 50bps, signals more to come
Coming Up
- Oil OPEC meetings all-day
- USD US ADP Employment change
- USD Fed’s Mester speaks
USD Rallies As Fed’s Williams and Bullard Call For Continued Rate Hikes This Year
The US Dollar has seen a softer start to the European open on Thursday, following solid gains yesterday. The DXY rallied more than 1% as the May ISM manufacturing index came in above expectations at 56.1 vs 54.4 expected. Additionally, the JOLTS job openings number was seen beating estimates, adding to the recent string of better-than-expected data.
Comments from Fed’s Williams and Bullard yesterday also helped propel the Dollar higher. Bullard made the case for the Fed pushing ahead with hikes to 3.5% by the end of the year while Williams said that the Fed must stick to the rate hikes currently projected for the year. Both sets of comments were seen as pushing back against the idea of a post-July pause in tightening.
Risk Sentiment Recovering As Shanghai Lockdown Ends
Equities markets around the globe fell yesterday amidst the pickup in the US Dollar. UK markets are closed today and tomorrow for the Queen’s Platinum Jubilee, but US markets are seeing a slightly better start In line with a softer Dollar today with Asian markets having traded higher overnight, erasing initial losses on the session. Shanghai re-emerging from lockdown today is helping lift risk sentiment into the end of the week.
CHF Rallies on Hawkish SNB Expectations, CAD Falls Despite BOC Hike
In FX, CHF continues to lead the way. With the market repricing SNB rate probabilities for the coming months, the erosion of monetary policy divergence between it and other G10 central banks is helping drive inflows to the Franc. Along with USD, CAD has been the biggest loser over late Asian and early European trading on Thursday. Despite the BOC hiking rates by 50bps yesterday and signaling more to come, the correction in oil appears to be driving the current downside in CAD.
Metals Markets Rebound Midweek
Gold and silver appear to be staging a fight back this week. Both metals have rallied off the lows printed earlier in the week. This comes despite the stronger move higher in the Dollar yesterday and appears to be a function of the weakness we saw in equities markets across Tuesday and Wednesday.
Crude Price Plunge Continues – EIA Release & OPEC Meeting Due Today
Oil prices have come back under pressure across the European open on Thursday. The market has now reversed sharply from initial gains on the week seen in response to news of the EU agreeing a partial ban on Russian oil.
Today, the market will receive the latest weekly update from the EIA which is forecast to record a 3 million barrel drawdown. OPEC will also meet today to discuss setting oil quotas for the coming month and while the cartel is widely expected to stick to its gradual set of increases. OPEC is reportedly mulling banning Russia from the OPEC+ agreement over Russia’s heavily reduced output recently. Such a move would allow for Saudi Arabia and other key producers to increase their output.
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