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Market Update – May 19 – Treasuries extended selloff, Stocks rallied, USD firmed

by May 19, 2023
May 19, 2023
The USDIndex extended its rally to 103.62, the best since mid-March. Yields have been on the rise all week and are at their highest levels since mid-March. Implied Fed funds futures are now pricing in material risk of about 40% for another 25 bp hike in June, and pricing out rate cuts. Stocks climbed after Speaker Kevin McCarthy told reporters the House of Representatives could vote on a debt ceiling deal as soon as next week.
The claims data continue to suggest a tight labor market, especially if the recent uptick in initial claims has been due to fraud in Massachusetts. In Asia, Nikkei rallied today to the highest since August 1990 – Bubble era! European futures also higher.

Overnight – German PPI inflation decelerated to 4.1% y/y in April, while the March number was revised down to 6.7% y/y from 7.5% y/y reported initially. The headline was the lowest since March 2021. Services price inflation has accelerated and that will keep inflation above target, even as goods price inflation decelerates further. Japan’s inflation stayed above BOJ’s target.

  • FX – USDIndex spiked to 103.46 today, EUR below 1.08. JPY reversed from 138.70 to 138.03. Sterling pulled back to 1.2390 consolidating around 50-DMA.
  • Stocks – The US100 surged 1.51% with strength from mega-tech. The US500 followed with a 0.94% gain, while the US30 was up 0.34%. #Walmart (+1.30%) raised its full-year forecast, as fiscal Q1 sales rose nearly 8% – In contrast to rivals Home Depot and Target. #Target tumbled (-4%). #Apple (+1.37%) touched a 1-year high. Nikkei jumped as high as 30,924.57. #Alibaba -5.41% as its sales missed.

  • Commodities – USOil – has stabilised to $72-72.50.
  • Gold has continued to decline as risk appetite improves, breaking the key $1960 floor and the 50-DMA yesterday. Currently at $1965.

Today: Fed’s Williams, Fed’s Bowman, ECB’s Schnabel, Fed’s Chair Powell and ECB’s Schnabel speeches. Canadian Retail Sales.

Biggest FX Mover @ (06:30 GMT) NZDUSD (+0.51%) Extends to 0.6266. MAs aligned higher, MACD lines just turned positive, and RSI is at 66 and rising. H1 ATR 0.00107, Daily ATR 0.00631.

Click here to access our Economic Calendar

Andria Pichidi

Market Analyst

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