The U.S. Dollar is trading in a steadier range after a major rally throughout yesterday that signified the high level of concern everyone has over the long-term fate of the global economy.
Overview
The Fed has only reasserted a few times this week that they are committed to fighting inflation and to do so via raising interest rates, honoring their stance as of their last policy meeting. With inflationary gauges in Consumer as well as Producer Price Indices only climbing higher than expected this week, it was natural that markets would worry, but all sectors have plummeted more than we thought, leaving no place to hide from turmoil and losses in value.
China’s handling of COVID has been a truly devastating development lately, but there may be some light ahead as officials made some announcements. One government representative said that tests will be made available to everyone in large cities that should be no more than a 15-minute-walk for residents.
Additionally, Beijing authorities denied that the city will be under lockdown and in Shanghai, they are hoping to achieve “no community spread” by next week. As a result, equities seem to be pointing at a day for making a comeback. We shall see if there is a rally that manifests itself the other way.
What to Watch Today…
- No major economic events are scheduled for today
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EUR
The Euro fell to its weakest levels since the end of 2016 and is struggling at the moment to move toward positive territory. Oil prices grew to $108.00/barrel and wheat futures rose dramatically to a record for the Euro-zone, only adding to inflationary pressure woes. Energy prices could swing all over the place as EU leaders are reconsidering the full ban of Russian imports since Hungary seems basically impossible to convince not to veto the proposal.
The nation had good relations with Putin and has the highest level of interdependence when it comes to its energy use. In the case of wheat, a very dry season has driven the commodity to its highest price in a month trading on the Chicago floor.
GBP
Yesterday we got a bit excited when announcing the rapid losses for currencies against the buck, and erroneously concluded that we had not seen GBP so low since 1985-levels were reached during the Brexit result back in 2016. We missed the fact that uglier levels were hit temporarily when the COVID appeared back in 2020.
Again, we aim to be accurate about our forecasts as well as current values, so we apologize for the confusion. That said, the Sterling is down and there is not a ton that could lift it other than better news out of the situation with the EU over the Northern Ireland protocol, since this is truly a bad time to revive Brexit flames.
