Dollar approaches 20-year highs, Fed meeting in focus 

“If your actions inspire others to dream more, learn more, do more and become more, you are a leader.” — John Quincy Adams 

 

 

HEADLINES

 

 

• Dollar approaches 20-year highs, Fed meeting in focus 
• Gold slips toward 2-1/2-month lows as Fed rate hike looms
• Oil turns positive on supply concerns, economic data
• Wall Street slides, 10-year Treasury yields cross 3% as Fed rate hike looms
• AUD/USD to soften over the medium term despite hawkish RBA – Wells Fargo
• AUDUSD Near Term: Downside favored

 

 

FOREX

 

 

Dollar approaches 20-year highs, Fed meeting in focus 

 

 

The dollar held just below a 20-year high against a basket of currencies on Monday before an expected Federal Reserve rate hike this week, with traders focused on the potential for the U.S. central bank to adopt an even more hawkish tone than expected. 

Though the chances are seen as low, some investors are watching for the possibility of a 75 basis point hike, or a faster pace of balance sheet reduction than currently expected.

 

 

COMMODITIES

 

 

Gold slips toward 2-1/2-month lows as Fed rate hike looms 

 

 

Gold prices slipped 1% toward 2-1/2-month lows on Monday as investors braced for a large interest rate hike by the U.S. Federal Reserve, as it seeks to contain soaring inflation, denting the zero-yield bullion's appeal. 

The U.S. central bank's Federal Open Market Committee is scheduled to begin its two-day meeting on May 3 and announce its decision the next day.

U.S. policymakers look set to deliver a series of aggressive rate hikes at least until the summer to deal with rapid inflation and surging labour costs, even as two reports released on Friday showed tentative signs that both may be cresting.

 

 

Oil turns positive on supply concerns, economic data 

 

 

Oil prices reversed course to trade in positive territory on Monday on fears supply might be crimped by a potential European Union ban on Russian crude. 

Both benchmarks fell by more than $2.00 earlier in the session on news the European Commission may spare Hungary and Slovakia from a Russian oil embargo as it prepares to finalize its next batch of sanctions on Russia on Tuesday.

 

 

STOCKS

 

 

Wall Street slides, 10-year Treasury yields cross 3% as Fed rate hike looms 

 

 

U.S. stocks turned lower on Monday and benchmark U.S. Treasury yields breached the 3% mark at the start of an eventful week of corporate earnings, economic data and an expected interest rate hike from the U.S. Federal Reserve. 

All three major U.S. stock indexes reversed earlier gains as 10-year Treasury yield reached the 3% mark for the first time in more than three years.

Wall Street's sell-off extended the S&P 500's fourth straight weekly decline, which capped its worst January-April percentage drop since 1932, as market participants girded for an expected 50-basis-point interest rate rise at the conclusion of the Fed's two-day monetary policy meeting on Wednesday.

 

 

ANALYSIS

 

 

AUD/USD to soften over the medium term despite hawkish RBA – Wells Fargo 

 

 

“In an environment of positive economic momentum and above-target underlying inflation, the Reserve Bank of Australia (RBA) has turned more hawkish. In its April statement and minutes, the RBA said that faster inflation and a pickup in wage growth have moved up the likely timing of an initial rate hike. More specifically and arguably more notable, policymakers opted to drop the "patient" language from its official statement, further cementing the hawkish shift in tone.”

“We have brought forward our expectations for RBA policy rate increases, and now expect an initial 15 bps rate hike in June, followed by 25 bps hikes at each meeting in July, August, November, and December, which would bring the policy rate to 1.25% at the end of 2022. In 2023, we expect the tightening cycle to continue with 25 bps hikes in Q1, Q2, Q3, and Q4, taking the RBA policy rate to 2.25% by the end of next year.” 

 

 

CHART

 

 

AUDUSD Near Term: Downside favored

 

 

Technical View: Short position below 0.7135. Target 0.7. Conversely, break above 0.7135, to open 0.7205.

 

 

Comments: The pair breaks below support.

 

 

Source: Trading Central 

 

CALENDAR

 

 

*Times in GMT

 

 

Source: FX Street Economic Calendar

Footnotes
https://www.reuters.com/business/dollar-holds-near-20-year-high-euro-struggles-2022-05-02/
https://www.reuters.com/article/global-precious/precious-gold-slips-toward-2-1-2-month-lows-as-fed-rate-hike-looms-idUSL3N2WU0RU
https://www.cnbc.com/2022/05/02/oil-slips-on-china-growth-worries-eu-weighs-russian-crude-ban.html
https://www.reuters.com/business/global-markets-wrapup-1-2022-05-02/
https://www.fxstreet.com/news/aud-usd-to-soften-over-the-medium-term-despite-hawkish-rba-wells-fargo-202205021606