Dollar at its best since 2015, Amazon woes spook markets – Daily Market Brief, May 2, 2022

  • The dollar index sees its biggest monthly gain in April since 2015
  • Amazon shares dived -14% on Friday, their worst daily drop since 2006
  • Market adage: Sell in May and Go Away
  • Day ahead: ISM Manufactufing PMIs released at 14:00 GMT
  • GBP/USD in focus ahead of the Fed / BOE this week

Amazon and Apple drag down Wall Street

It was a rough finish for Wall Street Friday last week, as indices were dragged down by a shocking -14% drop in Amazon shares following disappointing Q1 earnings. Apple fared better; the company reported record profits, but a soft outlook saw the shares drop over 3%.

Adding to the pain, a big jump in US core PCE – the Fed’s preferred inflation measure – led to even more inflation fears. The data has nearly set in stone an aggressive path of Fed tightening, set to begin with an expected 50-basis point hike at the FOMC meeting on Wednesday this week.

DXY has its best month since 2015

The dollar declined on Friday in some light profit-taking moves, after the USD/JPY pair and the dollar index (DXY) touched a 20-year high earlier in the week, and the EUR/USD hit a 5-year low.

There was a “sell the news” response to data that showed the personal consumption expenditures price index (core PCE index), the Fed’s preferred measure of inflation, jumped by 0.9% m/m in March, well up from the already high 0.5% rise in February.

The dollar is benefiting from Fed’s policy divergence and concerns over the global economy. USD/JPY struck a 20-year high on Thursday as the yen was hurt by the Bank of Japan’s dovish policy. In contrast, EUR/USD hit a 5-year low. The euro was already under pressure from a relatively dovish ECB but weakened significantly more since the Russian invasion of Ukraine because of Europe’s close economic ties and energy dependence on Russia.

Sell in May and go away?

April turned out to be the worst month for stocks in two years, ever since the Covid-19 pandemic started.

Unfortunately for those looking for a rebound in May, the old stock market adage of ‘Sell in May and go away’ – doesn’t come to their aid. The idea is to sell after the first four months of the year (which tend to be some of the most active months) and re-enter the market come September – after the summer lull in activity, and head towards the busier final three months of the year.

In the bull market of the past decade, the strategy has not fared well. However, this year has, so far, been far from bullish – and also has the added twist of the US midterm elections in November.

GBP/USD

The British pound plummeted last week, as traders priced in the diverging policy from the Federal Reserve and Bank of England that will be holding meetings this week. GBP/USD fell under 1.25, which now acts as near-term resistance.

The BOE is expected to hike by 25 basis points but accompany the hike with a more cautious message about the impact of inflation on the cost of living and the effect of higher energy prices on the economy. This will strike a clear contrast with the Fed, which is expected to hike by a ‘double’ 50 basis points and commit to further outsized hikes to combat increasingly out-of-control inflation.

Disclaimer: This article is not investment advice or an investment recommendation and should not be considered as such. The information above is not an invitation to trade and it does not guarantee or predict future performance. The investor is solely responsible for the risk of their decisions. The analysis and commentary presented do not include any consideration of your personal investment objectives, financial circumstances, or needs.

Share on facebook
Facebook
Share on twitter
Twitter
Share on pinterest
Pinterest
Share on email
Email
  • All
  • Blog
  • Economic Events
  • Featured Articles
  • Learn to Trade
  • Market Analysis
  • Market Analysis
  • News
  • News
  • OneRoyal News
  • Press Releases
  • Uncategorized
  • أخبار OneRoyal
  • الأحداث الاقتصادية
  • تحليل الأسواق
  • تصريحات صحفيه
  • تعلم كيف تتداول
  • غير مصنف
  • غير مصنف
  • مقالات مميزة
Blog

Gold rises ahead of US inflation data, could reach $2400 in this case

Read More →

Newest From Category

Newest from