11 April, 2022 – Daily FX Fundamental Update

Market overview

French elections affect the Eurozone

China’s COVID-19 worries the market

Fresh inflation data coming this week

U.S. Dollar strengthening

FOREX

U.S. Dollar Index (USDX)

The U.S. dollar edged higher in early European trades on Monday, helped by the continued strength of the U.S. bond yields. The U.S. Dollar Index traded 0.2% higher at 99.987, showing more strength after gaining around 1% last week. The dollar has received the benefit from a hawkish Federal Reserve, which lifted interest rates by 25 basis points at its March meeting and is set to continue hiking as the year progresses.

Euro (EURUSD)

However, the Euro edged higher to 1.0880, receiving support from the results of the first round of the French presidential election, with incumbent Emmanuel Macron polling the highest number of votes. Policymakers are finding difficulty balancing soaring consumer prices against pressure on growth from the war in Ukraine.

Sterling pound (GBPUSD)

GBP/USD fell 0.3% to 1.2993, falling after growth in the U.K. economy slowed more sharply than expected in February, as gross domestic product rose by 0.1%, down from 0.8% growth in January.

Chinese Yuan (USDCNY)

The USDCNY rose 0.1% to 6.3727 on the back of China’s producer price index growing 8.3% YOY. The world’s second-largest economy has to deal with the inflationary pressures from Russia’s invasion of Ukraine and its latest Covid-19 outbreak.

Elsewhere

USD/JPY rose 0.8% to 125.36, with the yen suffering as the Bank of Japan holds yields near zero, in direct contrast to the Fed’s stance. The Aussie fell 0.4% to 0.7429, falling to a three-week low as iron ore prices dropped.

Indices

U.S. Indices

Dow Jones Futures added 0.03%, S&P 500 Futures gained 0.07% and Nasdaq 100 Futures were up 0.14%. Meanwhile, market participants look ahead to inflation data while monitoring the ongoing conflict in Ukraine.

Market participants will be eying the inflation data set to be released this week. Additionally, the first-quarter earnings season is expected to heat up with JPMorgan Chase and Delta due to report results on Wednesday.

European Indices

European stocks fell on Monday as surging bond yields slammed technology shares, and volatility gripped French major stock. Furthermore, he pan-European STOXX 600 index shed 0.6%, led by a 2.1% slide in technology stocks. Among the European indices, the German DAX slipped 0.8%, and UK’s FTSE 100 inched 0.4% lower. Meanwhile, France’s CAC 40 has shed 1.7% so far in April, while the STOXX 600 is up 0.4%.

Asia-Pacific Indices

Asia Pacific stocks were down during the Asian session, with bonds continuing a selloff with concerns about inflation and monetary tightening.

China’s Shanghai Composite lost 1.93%, and the Shenzhen Component fell 2.53%, while Hong Kong’s Hang Seng Index slid 2.68%. Meanwhile, Japan’s Nikkei 225 was down 0.66%, and the Australian, the ASX 200 edged up 0.12%.

Metals

Gold

Gold prices dropped on Monday while surging Treasury yields boosted the dollar and countered fresh concerns about the war in Ukraine. Rising U.S. yields increase the opportunity cost of holding bullion to hedge against rising inflation.

Spot gold was down 0.2% at $1,941.95 per ounce after hitting a more than one-week high of $1,949.32 earlier. U.S. gold futures were flat at $1,945.70.

Other Metals

Palladium had gained 8.6% on Friday, as the newly refined Russian platinum and palladium were both suspended from trading in London. Spot silver shed 0.2% to $24.69 per ounce while platinum rose 0.5% to $979.97.

Energy

Oil prices dropped by more than $2 per barrel on Monday after a second straight week of decline. However, this drop is due to plans to release a record volume of crude and oil products from strategic stocks. Additionally, continuing coronavirus lockdowns in China raise worries about crude oil demand in the world’s second-largest oil-consuming country.

International Energy Agency (IEA) member nations will release 60 million barrels over the next six months, with the United States matching that as part of its 180-million-barrel release announced in March.

Brent crude futures were down 2% to $100.70 a barrel, while West Texas Intermediate crude lost 2.2% to $96.07.