Headlines:Dollar remains the laggard despite souring risk appetiteECB accounts: Some members viewed it as important to act on policy without undue delayECB policymakers reportedly ready to back at least two 25 bps rate hikes this yearBOJ buys ¥70.1 billion in ETFs todayChina reportedly in talks with Russia to purchase oil for strategic reservesEurozone March current account balance -€1.57 billion vs €20.8 billion priorUK May CBI trends total orders 26 vs 14 priorMarkets:CHF leads, USD lags on the dayEuropean equities lower; S&P 500 futures down 0.9%US 10-year yields down 4.2 bps to 2.842%Gold up 0.8% to $1,830.82WTI crude down 1.1% to $108.35Bitcoin up 0.6% to $29,371The session kicked off with a more cautious tone but that quickly turned into souring risk appetite as stocks retreated once again, with safety flows going into bonds and gold. The franc was also a notable beneficiary as European indices slid in playing catch up to Wall Street losses overnight.USD/CHF fell to 0.9800 initially, before extending losses to 0.9750 where it is down by over 1% on the day. The franc’s strength is also helped by a subtle push by SNB chief, Thomas Jordan, yesterday as he said that the central bank was ready to act on inflation if needed. I shared some thoughts on that here.It’s pretty much shaping up to be a risk-off kind of day but the dollar isn’t finding that to be much help. The greenback is lower across the board with EUR/USD up 0.5% to above 1.0500 and GBP/USD pulling back by 0.7% to above 1.2400.AUD/USD was initially higher around 0.7020, helped by a strong jobs report, before being dragged down to 0.6970 and then pushing back up now to near 0.7000 as the battle around the figure level continues.But just be wary though that if risk tones continue to sour, then the dollar’s lack of draw may not last for too long.

Read
the updated analysis below:

 

·     
AUDJPY has
reversed at the 90.29-71 monthly resistance area and is now targeting 87.28
last week’s low.

·     
AUDUSD has
reversed at the 0.7030 daily resistance level and is now targeting the 0.6826
monthly support level.

·     
EURJPY has
reversed at the 136.49 daily resistance level and is now targeting 132.65 last
week’s low.

·     
EURUSD has
closed back below the 1.0522 monthly resistance level.

·     
GBPJPY has
closed back below the 158.21 monthly support level and is now targeting 155.59
last week’s low.

·     
GBPUSD has
failed to hold Tuesday’s gains closing back below the 1.2411 daily resistance
level.

·     
NZDJPY
has
reversed at the 82.49 monthly resistance level and is now targeting 79.44 last
week’s low.

·     
NZDUSD
has
reversed at the 0.6380 weekly resistance level and is now targeting the 0.6204
monthly support level.

·     
USDCAD has
declined down to the 1.2800 level and found support.

·     

USDJPY has formed a lower top at the 129.40 daily
resistance level.

·     
USD Index
has closed back above the 103.81 monthly resistance level.

·     
S&P 500
has declined strongly down from the 4104 monthly resistance level.

This article was written by Duncan Cooper – Senior Market Strategist
& Trading Mentor at ACY Securities.

This content
may have been written by a third party. ACY makes no representation or warranty
and assumes no liability as to the accuracy or completeness of the information
provided, nor any loss arising from any investment based on a recommendation,
forecast or other information supplied by any third-party. This content is
information only, and does not constitute financial, investment or other advice
on which you can rely.

So as to demonstrate the ECB’s determination to achieve price stabilityMembers widely expressed concern over high inflation numbersMany of the upside risks to inflation outlook that was discussed last summer had materialisedMembers pointed out it was hard to imagine sustained higher inflation without increase in wage pressuresThe notion of „some time“ should not prevent timely rate rise if conditions so warrantedFull accountI think it is clear enough that the ECB is arguably unanimous in proceeding with a July rate hike. That said, it was expressed that „even relatively small steps might be sufficient to turn the current accommodative monetary policy stance into a restrictive stance“. That’s something to consider when it comes to viewing how aggressive the central bank is going to be in the months ahead.I mean, when you consider stagflation risks and a looming recession, the point being made about reaching the neutral level „only at a very late stage of the normalisation process“ may not necessarily mean the ECB could afford to hike continuously without interruptions this year.All this are but some food for thought for the coming months, in any case.

Their previous call for 4,900 was set back in 10 January, so it comes before all the shenanigans involving the Russia-Ukraine conflict and China lockdowns. No doubt that the inflation outlook and squeeze on businesses (in turn earnings) and consumers are part and parcel of the picture now.In case you missed it, Deutsche had earlier today called for the S&P 500 to fall to 3,650 before recovering to around 4,700 to 4,800 by year-end here.

This is exactly why we have been aggressively warning people to hedge and protect their investment portfolios. All year. This is not a short-term aberration that people can walk away from and just assume the market will magically rise back up. The hard truth is that global stock markets are only in the very early stages of pricing in a global economic slow-down that is already in full swing. There is in fact significant risk of a Triple Recession across the northern hemisphere of the world’s three largest economies, Europe, USA and China. China will be the first out of this difficult period, but even there too, subdued growth long term is the new reset normal.  Europe will continue to be impacted by war, sanctions and energy concerns. USA will have an inappropriately blindly aggressive central bank focussed only on inflation. Which is bizarre to say the least given it’s previous best efforts to completely ignore rising inflation for the past year. Everywhere, yes, the entire globe will continue to experience both extreme inflation and actual food or energy scarcity over the next 12 months. This, as we have been saying all year, even before the tragedy of Ukraine, is not an environment in which to be buying stocks.  This is a long term correction. Not a short term aberration. As such we cannot know if this will be a 6-18 month corrective phase or is in fact something far more significant akin to a 3-6 year decline in asset prices generally. When hedging investment portfolios is so easy these days, why take that degree of risk. I continue to suggest playing defence in the current global economic and financial market environment. Markets which are likely to remain strong, regardless of gains already seen and recent volatility, are the US dollar, Gold and Oil. The world is full of opportunity as long as investors play good defence now. So as to be in a position of relative power when markets eventually begin a new grand bull cycle. At the moment we are only in the early stages of ending the last grand super cycle 2009 to 2021. Clifford Bennett ACY Securities Chief Economist. The view expressed within this document are solely that of Clifford Bennett’s and do not represent the views of ACY Securities.All commentary is on the record and may be quoted without further permission required from ACY Securities or Clifford Bennett. This content may have been written by a third party. ACY makes no representation or warranty and assumes no liability as to the accuracy or completeness of the information provided, nor any loss arising from any investment based on a recommendation, forecast or other information supplied by any third-party. This content is information only, and does not constitute financial, investment or other advice on which you can rely.

Headlines:Dollar checks back its early week lossesUK April CPI +9.0% vs +9.1% y/y expectedECB’s Rehn: It is necessary for rates to move relatively quickly out of negative territoryECB’s de Cos: Bond buying should end in early Q3, first rate hike to follow shortly afterUS MBA mortgage applications w.e. 13 May -11.0% vs +2.0% priorEurozone April final CPI +7.4% vs +7.5% y/y prelimJapan to hold auction to sell 4.7 mil bpd of oil from its national reserve on 10 JuneMarkets:JPY leads, GBP lags on the dayEuropean equities lower; S&P 500 futures down 0.8%US 10-year yields up 2.1 bps to 2.991%Gold down 0.1% to $1,812.23WTI crude up 1.7% to $114.30Bitcoin down 1.0% to $29,727It was mostly a quiet session in terms of key headlines, though we did see UK inflation surge to 9% – its highest in some 40 years.That will keep the pressure on the BOE to act more aggressively but also squeeze the purse strings of UK consumers, with the cost-of-living crisis set to worsen in the months ahead.Risk tones were more cautious and that saw a return to old habits in markets with the dollar and yen gaining, while equities slumped.European indices were little changed early on but are posting slight losses now with US futures marked lower after a more sluggish start to the session earlier. Elsewhere, bonds are also offered with 10-year Treasury yields moving up to close in on the 3% mark again.In FX, EUR/USD is marked down by 0.3% to test 1.0500 while GBP/USD retreated from 1.2500 at the start of the day to hit a low of 1.2370 before keeping near 1.2400 currently.AUD/USD is also dragged lower by 0.3% to test the 0.7000 handle on the session while USD/CAD is up 0.2% to around 1.2830-40 levels.As much as there was some scope for optimism early this week, the subtle moves today are but a reminder that the storm clouds are still hanging over markets for the time being.

Downward pressure on the economy is increasingWill ensure economic operations in 1H 2022 are within reasonable rangeWill take effective measures to boost confidence of private firmsPretty much the usual talk as China continues to reaffirm support for the economy. I don’t think this is much of a hint of a LPR cut this coming Friday but we’ll see.

It didn’t take long for the breathing room to be suffocated as equities are starting to track lower again. Treasuries are also being offered on the day, so one might point to perhaps a continuation of some develeraging pressure. The dollar is firmer across the board alongside the yen, paring back some of the losses from the start of the week.Nasdaq futures are also seen down 0.9% and Dow futures also down 0.5% currently.

Prior +2.0% Market index 319.4 vs 358.9 prior Purchase index 225.0 vs 255.4 prior Refinancing index 826.9 vs 913.6 prior 30-year mortgage rate 5.49% vs 5.53% prior Mortgage activity in the US continues to take a big hit amid rising rates with the purchase index slumping to its weakest since May 2020 and the refinancing index dragged to its lowest since January 2019. This continues to suggest that there is a toll being exerted on the housing market even if prices are still yet to really cool down significantly. There’s a story to tell from the charts below: US dollar

The firm notes that:“Q1 results were strong, and while guidance was largely maintained, the outlook has become more uncertain. Some of this appears to be already in the price, as the market has moved ahead of earnings and therefore implies lower revisions ahead. But until expectations are reset lower, if recession worries don’t ease, we think that equity upside will be capped, at best, and that investors will continue to sell rallies.“That’s a fair argument considering that inflation and cost pressures are here to stay for longer. Adding to that will be the tightness in consumer spending, not to mention the rougher global growth outlook (recession fears) for the time being.