Forexlive Americas FX news wrap: US dollar breaks out, stocks tumble

Markets:

  • Gold down $19 to $1932
  • WTI crude down $2.54 to $101.23
  • US 10-year yields are stable at 2.90%
  • S&P 500 down 122 points, or 2.8%, to 4,271
  • Nasdaq at six-week low
  • USD leads, AUD lags

For the second day, the market started in a decent mood and imploded in a move that looks a lot like deleveraging.

Hints of problems in the general mood were clearest in the forex market as the Australian dollar and Kiwi dollar struggled from Asia. In Europe, worrying comments from Bailey yesterday, combined with poor retail sales in the UK, ultimately led to a clear break of 1.3000 in the Cable. It extended up to 1.2830 in a killer day with a close on the low.

The Euro fell again to 1.08 but failed to break through recent lows. This will be something to watch in the coming week with the April low at 1.0757 only 40 pips off the spot.

USD/JPY was taken for a ride as it navigated higher yields, intense risk aversion and some mistranslated comments from Kuroda. These comments initially propelled USD/JPY to 1.29, but were reversed a few hours later and the pair retreated to 128.55. Still, it was an impressive feat for the pair to finish higher despite the bad mood.

Another area to watch is USD/CNY, which has rebounded over 2% this week. It was the largest one-week move since August 2015, a week that also triggered strong equity selling.

The Dollar Index closed the week at the highest since the peak of the pandemic scare in March 2020. Skipping these two weeks would take it back to 2017. Notably, almost all trades closed at the extremes of the week, including AUD, NZD, GBP and CAD.

The good news is that it’s the weekend and the Fed’s blackout period begins on Saturday.

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