Investors Weigh on US Dollar
The DXY has seen a slight fall from its recent twenty-year high peak of 104.85 as investors weighed on a relief rally across equites earlier in the week and signs that China’s restrictions may ease off as Covid cases fall. This subsequently saw the safe haven currency lose some of the ground that it gained over the past week or so. Moreover, given the prevalence of inflation across the eurozone and UK, investors are considering how the ECB and BoE will need to enact a more aggressive monetary policy stance. Nevertheless, the DXY remains at levels not seen since December 2002 as inflationary pressures have caused CPI to hit highs of 8.5% (falling to 8.1% last month) in the US, forcing the Federal Reserve to tighten their monetary policy far greater than previously anticipated. As such the general market consensus is that the FOMC will make two further 50bpt rate hikes during their June and July meeting, and that the base interest rate will edge around 3.25% by the end of the year. This comes as the Fed begin to unwind their $9tn balance sheet by reducing their holdings of government treasuries and mortgage-backed securities by $47.5bn per month from June, which they intend to ramp up to $95bn per month over subsequent months.
Global Equities Take a Hit
Following yesterday’s CPI print in the UK and subsequent fears over the prospect of inflation, the FTSE 100 closed down over 1% while the FTSE AIM 100 fell 1.4%.
Erdoğan Seeks to Block Sweden and Finland’s NATO Accession
Accession protocols mean that any Nato member state could veto either Finland and Sweden from joining the organisation and thus Turkey’s leverage here is considerable. Hence, all eyes will be on Jens Stoltenberg’s next move as he tries to navigate this internal dispute as most member states welcome Sweden and Finland’s bid to join the organisation.
UK Retail Sales and Consumer Confidence Tomorrow
Have a great day.