GBP/USD down for 4th week

“It’s not about ideas. It’s about making ideas happen.” — Scott Belsky 

HEADLINES

• Sterling steadies but declines against dollar for a fourth week
• Gold hurtles to fourth weekly dip on dollar’s ascent as rate hikes loom
• Oil rises but set for weekly drop as fears of weaker demand limit gains
• Wall Street rallies at end of roller coaster week
• Musk says $44 bln Twitter deal on hold over fake account data
• USD/JPY: Reverting to traditional risk-off patterns – MUFG
• GBPUSD Near Term: Downside favored

 

FOREX

 

 

Sterling steadies but declines against dollar for a fourth week

 

 

Britain’s pound steadied against the dollar on Friday, although it was set for a fourth consecutive week of losses after selling that pushed the currency to two-year lows.

The pound had fallen to a two-year low of $1.2165 on Thursday after data showed Britain’s economy unexpectedly shrank 0.1% in March following a slump in car sales.

The pound has become the pressure valve of markets’ stagflation fears, Marinov said, adding: “Different measures at the moment show that cable should be $1.26/7 not $1.20, meaning we are already pushing deeply into undervalued territory”.

 

 

COMMODITIES

 

 

Gold hurtles to fourth weekly dip on dollar’s ascent as rate hikes loom

Gold fell more than 1% on Friday and is set for its fourth straight weekly decline, as the dollar’s strong run with more aggressive U.S. interest rates on the horizon sapped appetite for bullion.

“Gold is being weighed down as the Fed has been committed to raise interest rates at a fast pace and in addition, the dollar has been extremely strong,” said David Meger, director of metals trading at High Ridge Futures.

 

 

ENERGY

 

 

Oil rises but set for weekly drop as fears of weaker demand limit gains

 

 

Oil prices rose on Friday but were headed for their first weekly loss in three weeks as worries about inflation and China’s COVID lockdowns slowing global growth offset concerns about dwindling supplies from Russia.

Analysts, however, continue to focus on the prospect of a European Union ban on Russian oil, after Moscow imposed sanctions this week on European units of state-owned Gazprom and after Ukraine halted a key gas transit route.

 

 

STOCKS

 

 

Wall Street rallies at end of roller coaster week

 

 

Wall Street rallied on Friday, ending a week of wild market gyrations marked by signs of peaking inflation and worries that the Federal Reserve might tighten policy too aggressively.

Despite the gains, the S&P 500 and the Nasdaq were on course to post their sixth consecutive weekly loss. It would be the longest losing streak for the S&P 500 since fall 2012 and for the Nasdaq since spring 2011.

For the first three months of the year, analysts now see aggregate year-on-year S&P 500 earnings growth of 11.1%, up from 6.4% at quarter-end, per Refinitiv.

 

 

Musk says $44 bln Twitter deal on hold over fake account data

Elon Musk tweeted on Friday that his $44-billion cash deal for Twitter Inc (TWTR.N) was “temporarily on hold” while he waits for the social media company to provide data on the proportion of its fake accounts.

Twitter shares initially fell more than 20% in premarket trading, but after Musk, the chief executive of electric car market Tesla Inc (TSLA.O), sent a second tweet saying he remained committed to the deal, they regained some ground.

Since Musk inked his deal to acquire Twitter, technology stocks have plunged amid investor concerns over inflation and a potential economic slowdown.

 

 

ANALYSIS

 

 

USD/JPY: Reverting to traditional risk-off patterns – MUFG 

“The fact that US yields have been more sensitive to asset price declines than to higher than expected inflation could have notable implications for momentum in USD/JPY. If market participants are shifting to the preservation of capital rather than the return on capital and we see leveraged positioning being cut further, USD/JPY is likely to fall further, possibly a lot further.”

“Yesterday, the 1-year USD/JPY risk-reversal had its largest one-day swing favouring JPY upside since 2010 if you exclude the COVID pandemic period. If financial conditions continue to tighten leveraged positioning is most prone to reversal. In that regard, we would point to the yen as being a highly leveraged long position in G10 FX.”

“Financial conditions continue to tighten and if this continues over the coming weeks it should help limit the upside for US rates which we would view as a scenario that leaves USD/JPY most vulnerable to a correction.”

 

 

CHART

 

 

GBPUSD Near Term: Downside favored

Technical View: Short position below 1.231. Target 1.214. Conversely, break above 1.231, to open 1.237.

Comments: The pair is expected to resume descend after correction.

Source: Trading Central 

CALENDAR

*Times in GMT

 

 

Source: FX Street Economic Calendar

 

Footnotes
https://www.reuters.com/article/britain-sterling/update-1-sterling-steadies-but-declines-against-dollar-for-a-fourth-week-idUSL2N2X50QE
https://www.cnbc.com/2022/05/13/gold-markets-dollar-federal-reserve-inflation-interest-rate.html
https://www.cnbc.com/2022/05/13/oil-markets-demand-outlook.html
https://www.reuters.com/markets/europe/futures-climb-twitter-slumps-musk-puts-deal-hold-2022-05-13/
https://www.reuters.com/technology/musk-says-44-billion-twitter-deal-hold-2022-05-13/
https://www.fxstreet.com/news/usd-jpy-reverting-to-traditional-risk-off-patterns-mufg-202205131553