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MTrading Team • 2022-05-19

Sentiment improves despite looming inflation, growth fears, risk assets pare recent losses

Sentiment improves despite looming inflation, growth fears, risk assets pare recent losses

The bloodbath on Wall Street probed Asian traders before upbeat headlines from China and repetitive Fedspeak allowed consolidation of losses. Even so, fears of heavy price pressure and economic slowdown kept the recovery moves in check.

The US Dollar fades rebound from two-week low and underpins mild gains in commodities, as well as Antipodeans. Budgets in New Zealand and Indonesia joined mixed Aussie jobs report to offer a sigh of relief but the equities couldn’t overcome the negatively spread during the US session.

Cryptocurrencies also benefited from the USD weakness but stay on the road to another weekly fall.

ECB Meeting Accounts and second-tier US data may entertain traders but bulls are far from retaking control.

Following is the list of major assets’ latest performances:

  • Brent oil rises for the first time in three days, up 0.40% near $109.80 by the press time.
  • Gold prints mild losses but struggles for clear directions around $1,820.
  • USD Index fades bounce off weekly low around 103.70.
  • FTSE 100 declines 1.0% but DAX and EUROSTOXX50 both lose over 2.0% daily at the latest.
  • Dow Jones dropped 3.57% while S&P 500 and Nasdaq slumped over 4.0% amid broad pessimism on Wednesday.
  • BTCUSD and ETHUSD both gain around 1.5% while trying to defend $29,000 and $1,900 of late.
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Bears take a breather on China, Fed news

A reduction in mainland China covid figures joined Shanghai’s plan of gradual opening to trigger optimism in Asia. The moves joined NZ and Indonesian governments’ efforts to ward off inflation/growth fears, which in turn underpinned NZDUSD and USDIDR. Also, a softer-than-forecast Australia Employment Change follows the downbeat Wage Price Index and helps AUDUSD to print mild gains.

The cautious optimism joins Fed speakers’ sustained push for the 50bps rate hike to weigh on the US dollar, which pares the biggest daily gain in a week. That said, the greenback gauge jumped the previous day after Wall Street benchmarks reported the biggest daily fall in two years amid growth/inflation woes. Elsewhere, prices of gold remain indecisive but those of crude oil snap a two-day downtrend.

BTCUSD and ETHUSD lick their wounds at one-week low on softer USD even as looming concerns over the regulations weigh on the corrective pullback. The cryptos dropped heavily the previous day as ex-Fed Chair Ben Bernanke lashed out at these currencies' nature while renowned investor Bill Ackman also criticized Terra’s collapse.

⏫ 🟢 Strong buy: USDCAD, USDCHF

⏬ 🔴 Strong sell: Nasdaq, silver, AUDUSD

⬆️ 🟢 Buy: USD Index, USDJPY

⬇️ 🔴 Sell: DAX, FTSE 100, brent oil, gold, ETHUSD, BTCUSD

Risk-aversion keeps bears hopeful

Despite the recent consolidation in markets, bulls are far from returning as multi-year high inflation in developed economies joins supply-chain woes emanating from the Russia-Ukraine crisis and China’s covid conditions. The increasing price pressure also challenges the global economic recovery from the pandemic and suggests another round of stagflation and downbeat GDP.

On the calendar, the ECB Meeting Accounts may add to the Euro’s recent strength on the condition that the scheduled Fedspeak and activity/job numbers from the US should not add to the prevailing market fears.

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