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27
May

PCE Price Index, Personal Income, Consumer Sentiment

calendar 27/05/2022 - 05:39 UTC

While the dollar overall weaker against other major currencies as seen in the performance of the USDX, among emerging markets the trend was a bit mixed. The USD/CNH pair continued rising on Thursday for the second day in a row and the USD/INR pair remained mostly flat this week trading still less than 0.4% below the all-time high from Monday last week. Others like the USD/ZAR and USD/MXN however traded in line with the trend among major currencies stronger against the greenback.

A bearish sentiment seems to persist in the crypto markets. Bitcoin traded at times as low as $28K on Thursday, while the second biggest cryptocurrency by market cap – Ethereum underperformed even more significantly leaving the range it occupied for more than a week and falling below $1,750. These developments helped the Bitcoin dominance to improve towards around 4%, though the total crypto market cap dropped to just around $1.25 trillion.

U.S. and European stock market indices like the US 30 and the Germany 40 performed fairly well on Thursday with these markets on track to end the week in the green. The sentiment was not so optimistic in some Asian markets though with the Japan 225 (Yen) index trading almost flat on a weekly basis and the China A50 trading by Friday morning down by around two per cent compared to the levels of last week.

On Friday in the U.S. the Core PCE Price Index will be published as well as data on consumer spending, personal income and the University of Michigan Consumer Sentiment survey.

EUR/USD

As the dollar continued to devaluate against other major currencies, the EUR/USD pair traded for the first time in more than a month above the rate of 1.075.

This comes at a time when fundamental data coming in from the U.S. was not signalling a particularly strong economic sentiment with the real GDP for the first quarter revised lower to -1.5% q/q growth (previous figure -1.4%), while the Pending Home Sales Index declined by 3.9% m/m in April.

A key data release on Friday could be the Core PCE Price Index for April. After the rate of price inflation according to this index reaching 5.2% y/y in the previous month, analysts hope that the rate of inflation might subside in this current release.

EUR/USD

USD/TRY

While some emerging market currencies were still trading weaker this week despite the light dollar, the Turkish lira (TRY) was one of the worst-performers with the USD/TRY pair trading at its weekly peak on Thursday up by more than 3.5% compared to the market close levels from last Friday.

Despite the pressure on the currency the Turkish central bank decided to keep its interest rate unchanged at 14% on Friday for the fifth month in a row. Given the very high rate of inflation as a recent consumer price index (CPI) showed a price growth amounting to almost seventy per cent compared to last year, a rate of just 14% would mean negative real returns. However, as the Turkish president over the past years voiced on multiple occasions his displeasure with high rates and was said to have even replaced the central bankers in charge to get his preferred policies, it remains unclear which economic parameters would actually compel the central bank to change their current approach.

USD/TRY

WTI Oil

Oil prices edged higher in the early afternoon, with the WTI crude oil price rising by more than 2.6% within just two hours starting 1 PM GMT. The recent rise in oil prices is to some extent being attributed to the at least cautious level of reopening in China following strict local lockdowns as well as other factors like increased demand in the United States.

As usual on Friday the U.S. Baker Hughes Oil Rig Count will be published. Last week the statistic indicated a rise in producing facilities by 13, reaching a new high since March 2020 and thus coming somewhat close to the activity levels seen before the pandemic decimated parts of the U.S. oil industry.

WTI Oil

US 500

After only making slow progress to the upside at the beginning of the week, equity indices like the US 500 had their best daily performance in more than three week and by Friday morning the index was up by more than 3.8% on a weekly basis. This allows for a real chance that the index will close now for the first time over the past eight weeks higher on a weekly basis.

While practically all sectors traded up on Thursday there were a few that stood out like travel industry stocks (Airline Industry ETF +5.04%) like Norwegian Cruise Line (+12.11%), Delta Air Lines (+5.73%) and American Airlines (+6.73%).

Also a strong performance in Chinese stocks listed in the U.S. could be observed with Baidu (+14.18%) and Pinduoduo (+9.71%) closing among the top five NASDAQ Composite index components that day. Alibaba (+14.81%) also performed strongly and despite the earnings per share declining to RMB7.95 per ADS share, this was still better than what some analysts have anticipated while the company also managed to improve its revenue results.

US 500

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