The dollar has steadied after yesterday’s rally that pushed the USD index back above the 103.00 mark
US stocks fell sharply on Thursday amid a global sell-off that intensified after the ECB expressed a more hawkish tone than expected. The central bank confirmed its plan to hike rates in Huly and hinted at more aggressive hiking in September. Investors were also nervous ahead of the key US inflation report due later today. The Dow Jones Industrial Average fell 1.94%, the S&P 500 dropped 2.38% and is now down more than 16% from its all-time high, while the Nasdaq Composite shed 2.75%, with tech giants leading the losses. Apple shed 3.6%, Amazon dropped 4.15%, and Meta Platforms gave up nearly 6.5%.
Tracking global equities sell-off, Asian stock markets fell amid rising concerns about global growth, with MSCI’s broadest index of Asia-Pacific shares outside Japan shedding nearly 1% on Friday. Adding to a more downbeat tone, the cities of Beijing and Shanghai are back on COVID-19 alert. Still, the Shanghai Composite index managed to gain nearly 1.5% due to some hopes of regulatory easing on tech firms. Meanwhile, Japan’s Nikkei 225 fell 1.49% and South Korea’s Kospi lost 1.13%.
In Europe, equities opened lower on Friday as investors continued to digest the rate hike guidance from the ECB. Also on the negative side, the Deutsche Bundesbank cut its German growth forecast for 2022, citing elevated inflation and ongoing tensions surrounding Ukraine. The bank also said that inflation “will not fall by itself” and argues that “resolute action” is needed by the ECB.
Meanwhile, the dollar has steadied after yesterday’s rally that pushed the USD index back above the 103.00 mark amid a plunge in the euro and other riskier assets in the aftermath of the ECB meeting. The index is now in a wait-and-see mode ahead of the inflation report that will set fresh tone for USD pairs ahead of the weekend. EURUSD stays just above the lower end of the extended trading range, struggling below the 20-DMA. Should the CPI report surprise to the upside, the pair may suffer even deeper losses in the near term.