Markets pare weekly losses but USD stays firmer

Thursday turned out as a positive day for global markets as Wall Street snapped a two-day downtrend while Asia-Pacific stocks and European equities also register gains of late. 

The USD Index (DXY) refreshes multi-month top by tracking Treasury yields, which in turn weigh on commodities including gold and crude oil, not to forget downing the Antipodeans.

Risk sentiment remains mixed as the Ukraine-Russia peace talks stumble and the Fed speakers keep suggesting faster normalization, as well as balance sheet reduction. Even so, hopes that the US economy will withstand Fed’s dialing back of easy money policies and upbeat earnings season for Q1 2022 favored traders to lick their wounds.

Cryptocurrencies also remained on the front foot despite staying negative for the week amid fears of a firmer USD and more hardships for the unregulated e-currency market.

Following is the detailed performance report of the key financial assets:

• BRENT OIL remains on the back foot around $101.00 rate, down 0.20% intraday.
• GOLD snaps two-day rebound with mild losses around $1,930.
• USD INDEX refreshes the 23-month high while poking 100.00 rate.
• DOW JONES, NASDAQ and S&P 500 all recovered with mild gains.
• DAX rises 0.90% reaching 14,300 rate whereas FTSE 100 adds 0.30% to 7,630 level.
• BTC/USD rises 0.40% to $43,650, ETH/USD gains 1.30% to $3,270 rate.

US data, pharmacy shares triggered cautious optimism ahead of the key next week 

Record low US Jobless Claims joined the upbeat performance of the US pharma companies to offer a positive day to Wall Street. Even so, the gains were limited as strong yields and fears of faster Fed tightening challenged bulls before the next week’s US inflation data and the ECB. Also challenging the optimists were the US, EU and the UK’s crackdown on Russia, as well as fears of more supply crunch in Asia going forward due to China’s covid-led lockdowns and Ukraine crisis.

The US dollar became the sole winner and refreshed its 23-month high while gold and crude oil prices had to step back on early Friday. Further, strong US Treasury yields continue to propel USDJPY whereas AUDUSD and NZDUSD remained on the back foot.

Firmer USD challenged BTC/USD and ETH/USD even as the latest rebound underpins expectations of a bigger upside move. Adding to the northside filters are fears that the US and China crackdown on cryptos may escalate in the coming days.

⏫ 🟢 Strong buy: DAX, FTSE 100

⏬ 🔴 Strong sell: Gold, silver

⬆️ 🟢 Buy: USD Index, ETH/USD, Nasdaq

⬇️ 🔴 Sell: Brent oil, DOW JONES, S&P 500, BTC/USD

Nothing matters more than inflation

Anxiety over the Fed’s next move keeps investors troubled ahead of the next week’s Q1 2022 earnings report. Also challenging the risk appetite are the latest sanctions and economic treatments for Russia, which in turn suggests further geopolitical fears ahead.

As a result, the next week’s US inflation data becomes critical for the market players to watch. While the price pressure is likely to remain elevated, any surprise pullback in the figure can trigger a notable rebound of the riskier assets that have lost the momentum of late.

For the day, cautious optimism can help the equities but the greenback’s strength may keep weighing on the commodities and Antipodeans amid a likely sluggish end to the week.

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