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The dollar traded overall only moderately stronger against other major currencies on Tuesday as seen from the performance of the USDX index. Many emerging market pairs, which over the past week were significantly affected by the strength of the dollar and the respective weakness of the other market as was the case for example for USD/CNH and USD/INR stabilised for now and did not reach a new high. For the USD/TRY pair it was quite a different story. After around two months of fairly calm market conditions and the pair trading consistently below the 15.0-threshold, the breakout at the beginning of this week marked at least for now another series of lira devaluation as the pair is up by close to three per cent since Friday. Last week official Turkish consumer price index (CPI) data indicated that the annualised rate of inflation is close to 70%.
While the major cryptos Bitcoin and Ethereum managed to somewhat consolidate their position at levels above $31k and close to $2.4k respectively, for some altcoin markets the crypto sell-off continued causing the estimated total market cap of the entire crypto market to decline below $1.5 trillion. After already steep losses at the beginning of the week, the Terra coin continued to decline at a rapid pace trading by Wednesday morning around 89% lower compared to a week ago. Another potentially important development was that the TerraUSD ‘stablecoin’ traded since Monday at levels significantly below the ‘stable’ one dollar threshold. This came as Forbes reported just following the release of the U.S. Federal Reserve’s Financial Stability Report, where stablecoins can be affected especially during market stress period due to illiquidity and runs on funds. Other top market cap stablecoins like Tether, USD Coin and Binance USD so far remained fairly stable, though down the line some decline could be observed among less capitalised tokens.
One of the most anticipated releases for Wednesday is set to be the U.S. CPI release for April, which some hope might show a turnaround in the direction the rate of inflation takes. If the rate of price appreciation comes down this would also mean that central banks like the Federal Reserve do not need to take an ultra-hawkish monetary policy stance, which in turn is seen as positive for equity markets.
With the dollar again moderately appreciating the EUR/USD rate declined below 1.055 but remained for now well within the range seen over the past week. The German CPI results for April were in line with the preliminary numbers indicating an annualised rate of inflation at 7.4%.
Fundamental data from the eurozone seen on Tuesday was fairly mixed as the German ZEW current conditions survey declined more than anticipated to an index level of -36.5, while the flat growth in terms of industrial production in Italy during March was better than some have anticipated.
Gold prices declined towards a new three months low, while silver was also under pressure. Some other precious metals like palladium traded fairly stable and platinum prices managed even to rise higher, trading again at times close to the one thousand dollar level.
For gold investors the U.S. CPI figures could also be of significant importance as the rate of inflation has potential to affect markets like fixed income yields, real yields as well as the positioning in ‘safe haven’ assets as means of capital preservation during times of uncertainty.
Oil prices declined on Tuesday for the second day in a row with a barrel of WTI crude oil at times traded below $99, though in a sharp turnaround later on, prices rebounded by Wednesday night above the $101 mark. The drop in the evening hours might have been supported by the weekly data release of the American Petroleum Institute (API) showing that crude oil stockpiles were up by 1.6 million barrels, while gasoline and distillate stockpiles also moderately increased.
The Short-Term Energy Outlook (STEO) by the Energy Information Administration (EIA), which was released on Tuesday indicated a base-case scenario with brent crude oil spot pricing averaging at $107 in Q2 and $103 in the second half of this year. Meanwhile Bloomberg reported the oil ministers of Saudi Arabia and the UAE hinting that spare capacity in all energy sectors has decreased following the actions connected to the Russian invasion of Ukraine and that OPEC+ would not be able to guarantee sufficient supplies of crude oil once the global economies fully recover from the impact of the COVID pandemic.
On Wednesday the EIA publishes its weekly oil market data including statistics on the stockpile changes of crude oil, gasoline and distillates.
Though during the session on Tuesday the US 500 reached intraday a new one year low, later on the index somewhat stabilised and still traded close to the 4,000-mark. One reason for the stabilisation were statements from Federal Reserve officials Bostic and Barkin whose comments were taken by the market as signs that the Fed will indeed continue to hike but also take other factors besides inflation into consideration seeking to distance themselves from the ultra-hawkish policies of Paul Volcker under whose leadership rates were raised towards double-digit percentage levels in order to fight inflation.
The earnings release of the crypto exchange company Coinbase (-12.75%) already happened at a time when the crypto market turned significantly bearish. In the following after-hours session the stock price dropped by another fifteen per cent which would mean another all-time low and a combined loss of more than 75% for initial investors participating in the direct listing when the company went public. The revenue for the first quarter at $1.17 billion fell significantly short of investors’ expectations. At the same time the number of retail monthly transaction users declined to 9.2 million, which represents a drop by around 19% compared to the previous quarter.
On Wednesday quarterly results from Walt Disney, Rivian, Coupang, Beyond Meat, Sonos and others can be expected followed by Affirm Holdings and CyberArk Software on Thursday.
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