Has the combination of inflation, war, covid and oil supply finally hit?
$GOLD, $BTC, $EUR and $GBP are all down on open this morning whilst the $DXY and $USD are up. Talks of a 0.75bp hike from the FED next month have tipped the scale for Dollar strength whilst a predictable win for Macron should have boosted the $EUR this morning it instead fell through support levels.
FRENCH ELECTION
Macron has beaten Le Pen to win a second term as French President, but the markets haven’t reacted as most predicted. Many were expecting a solid rally for the EUR/USD today, but when European markets opened this morning, the EUR dropped over 0.5%, breaking through support. Most markets are down this Monday, except USD, with the Dollar index sitting at 101.5, highs we haven’t seen since the peak of Covid in March 2020. This could signify that more prominent macro factors such as inflation, war, and covid are taking a toll on markets.
ECB RATES
The European Central Bank’s policymakers have indicated they want to end bond purchases asap and begin to raise interest rates as soon as July, bullish news for EUR. Still, it could be too little too late as inflation continues to jump higher with no end in sight for the war. A weak $EUR looks set to continue in the short-term.
RUSSIA
On the topic of Russia, there has been little to no progress on peace talks as it appears that Vladimir Putin has lost interest in diplomatic efforts. It is reported that his new goal is to take as much land and control from Ukraine as possible.
US EARNINGS
175 S&P 500 companies will be reporting earnings for the first quarter this week, including Apple, Microsoft, Amazon, and Alphabet, who make up one-fifth of the S&P 500. Other megacorps announcing their earnings next week include Meta, Visa, Mastercard, Exxon, Coca-Cola and Pepsi. How well these companies have faired post-pandemic will be a good indicator of the health of the general economy in the face of inflation and low growth.
WEEK AHEAD
Key data this week includes US and EUROZONE GDP on Thursday and Friday, respectively. Both will indicate the impact the Ukraine war and post-pandemic recovery has had on the world.
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