The USD index advanced to fresh May 2020 highs before correcting slightly lower
US stocks ended slightly lower on Tuesday, erasing early gains after the data showed that US inflation rose in March at the fastest annual pace in forty years. The consumer price index rose 8.5% in March from a year before, outpacing February’s 7.9% print and exceeding expectations. Adding to a more cautious tone in the markets, Fed’ Brainard reiterated the central bank’s readiness to take an aggressive stance against inflation. As a result, the S&P 500 declined 0.34%, the Dow Jones Industrial Average slid 0.26%, to 34220.36 and the technology-heavy Nasdaq Composite fell 0.3%.
Asian stock markets were mixed on Wednesday as investors digested Chinese trade data. USD-denominated exports grew 14.7% year-on-year in March, above expectations for a 13% increase. Imports fell 0.1% year-on-year versus the 8% growth predicted. The Shanghai Composite index fell 0.82% as new COVID-19 cases in Shanghai topped 26,000. Hong Kong’s Hang Seng finished unchanged, Japan’s Nikkei 225 rallied nearly 2%, and S&P/ASX 200 in Australia gained 0.34% despite Australian consumer sentiment slipped for a fifth straight month in April.
In Europe, equities opened 0.3%-0.5% lower, with risk sentiment looking mixed at this stage, as US stock index futures are pointing higher in early-premarket trade. The pan-European Stoxx 600 slipped 0.2% in early deals. On the data front, UK inflation rose by 1.1% in March, exceeding expectations for a 0.7% climb and coming at the highest in thirty years. Investor focus is now shifting towards the ECB’s monetary policy decision on Thursday that could set the tone ahead of the weekend.
In currencies, the dollar has steadied after yesterday’s rally fueled by rising US inflation. The USD index advanced to fresh May 2020 highs around 100.52 earlier on Wednesday before correcting slightly lower as traders took some profit at long-term peaks. Now, should the 100.56 mark give up, the buck will advance to April 2020 highs within its strong bullish trend. As such, EURUSD plunged to the 1.0810 area before turning slightly positive in recent trading. The euro could stage a bullish bounce later in the week if the ECB delivers a hawkish tone on Thursday.
