Inflation, recession constitute double-barrel attacks on market sentiment

Global markets remain under pressure as record-high US inflation expectations joined fears surrounding global economic slowdown. Also contributing to the risk-off mood are the headlines suggesting China’s covid lockdown and geopolitical tensions about the Russia-Ukraine crisis.

The sour sentiment propels the US dollar to refresh 20-year, as per the USD Index, while drowning the prices of gold and crude oil. Antipodeans weren’t left behind when conveying the risk-aversion but the NZDUSD bears struggled ahead of Wednesday’s RBNZ rate hike.

Cryptocurrencies also remain pressured for the third consecutive day as corrective pullback fades amid hopes of more supplies and regulations.

Following are the latest moves of the key assets:

• Brent oil extends the week-start pullback to $106.70, down 1.30% at the latest.
• Gold remains pressured around the yearly low near $1,723.
• USD Index stays firmer at the highest levels since 2002, up 0.25% intraday near 108.50 by the press time.
• FTSE 100 is down nearly 0.20% while STOXX50 and DAX are both losing nearly 1.0% at the latest.
• Wall Street closed with mild losses on Monday.
• BTCUSD drops back below $20,000 while the ETHUSD bears also approach $1,000 as they lose 1.2% and 2.7% respectively at the latest.

No entry for optimists

Even if China tried to defend the bulls by teasing multi-billion dollars worth of stimulus, fresh covid-led activity restrictions weighed on the risk profile. Major attention, however, was given to the all-time high of the US inflation expectations for one-year, as well as economic slowdown concerns emanating from Europe due to the scheduled halt in Russian energy supplies. The G7 readiness to cap Russian oil prices and the UK’s political crisis are extra negatives on the market sentiment.

The USD Index ignores downbeat bond coupons as yield curves portray recession fears. The greenback gauge, however, approaches the key hurdle surrounding 110.00 as traders brace for Wednesday’s US inflation release.

Prices of gold renew yearly low and that of GBPUSD slump to a fresh two-year low whereas EURUSD teases the parity while refreshing the 20-year bottom. Further, USDJPY retreats from the highest levels since 1998 as yields play their role.

Talking about cryptos, chatters surrounding Mt. Gox likely releasing around 150,000 Bitcoin join fears of more regulations and bull’s failures to cross the longer-term moving averages to keep BTCUSD and ETHUSD bears hopeful.

⏫ 🟢 Strong buy: USDCAD

⏬ 🔴 Strong sell: Nasdaq, silver, ETHUSD

⬆️ 🟢 Buy: USD Index, USDJPY

⬇️ 🔴 Sell: DAX, FTSE 100, gold, BTCUSD

Wednesday is the key day

Be it the anticipated rate hikes from the RBNZ and the BOC or the US CPI, Wednesday appears to be the week’s most important day for traders. Although fears of economic slowdown and central bank’s aggression could keep fueling the USD, the NZDUSD and the USDCAD may witness intermediate rebounds should the respective central banks don’t disappoint hawks.

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