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MTrading Team • 2022-05-13

Riskier assets rebound, USD eases as Fed’s Powell reiterates 50 bps rate hike call

Riskier assets rebound, USD eases as Fed’s Powell reiterates 50 bps rate hike call

Market sentiment improved during early Friday as light calendar and neutral Fedspeak joins headlines from China suggesting likely improvement in the covid conditions and easing virus-led restrictions going forward.

The risk-on mood helped trigger the US dollar’s pullback from the fresh 20-year high flashed on Friday, which in turn allowed gold and crude oil prices to recover. Further, Antipodeans cheer optimistic news from Shanghai and Beijing, in addition to the softer USD.

Prices of BTCUSD and ETHUSD portray the biggest daily gains in over a week while equities in Asia-Pacific, as well as in Europe and the UK, print mild gains due to the positive risk profile.

Moving on, second-tier data may entertain traders but qualitative factors will be more important for clear directions.

Following is the list of major assets’ latest performances:

  • Brent oil rises for the third consecutive day, up 0.80% around $108.50.
  • Gold recovers from three-month low while grinding higher towards $1,830.
  • USD Index retreats from 20-year high near 105.00 to retest 104.50.
  • FTSE 100, DAX and EUROSTOXX50 all rise around 1.30% by the press time.
  • Dow Jones dropped 0.33% but S&P 500 declined 0.13% whereas Nasdaq rose 0.06% on Thursday.
  • BTCUSD and ETHUSD both add around 5.0% intraday while picking up bids near $30,200 and $2,050 respectively.
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Cautious optimism it is!

After the US PPI matched the downbeat market consensus, unlike CPI, Fed Chairman Jerome Powell got a chance to repeat his calls for 50 basis points (bps) rate hike in the next two meetings, pouring cold water on the hopes of a 75 bps rate hike. Following that, Fed’s Daly also turned down the importance of such a big move and allowed the pullback of the US dollar from the fresh highs since 2002.

This offered a sigh of relief to equity investors and printed a mixed closing of Wall Street benchmarks, despite a downbeat opening. The positive impression got a boost from headlines from Shanghai expecting a sooner end to harsh lockdowns while Beijing also announced plans for robust vaccinations and hinted at brighter days ahead.

Given the firmer USD and upbeat equities, not to forget positive news from China, commodities and Antipodeans lick their wounds even if the weekly performances continue to show across the board pessimism.

Above all, BTCUSD and ETHUSD recovered the majority of the previous day’s losses as the USD pullback joins comments from US policymakers suggesting a cautious approach in designing crypto regulations.

⏫ 🟢 Strong buy: USDJPY, USDCAD

⏬ 🔴 Strong sell: Nasdaq, silver, AUDUSD

⬆️ 🟢 Buy: USD Index

⬇️ 🔴 Sell: DAX, FTSE 100, brent oil, gold, ETH/USD, BTC/USD, GBP/USD

US Consumer Sentiment to decorate the calendar

Having witnessed a mixed response from the US price pressure gauges, namely CPI and PPI, market players will keep their eyes on the first readings of Michigan Consumer Sentiment data for clear directions. Although the May-month figures are expected to print a softer number, traders will be more interested in watching inflation-linked components to better forecast the Fed’s next move.

Additionally, headlines from Russia, China and developments surrounding inflation/growth will be important for fresh impulse.

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