Positive end to negative week
Stock markets are on track to finish higher this afternoon as traders have shrugged off the negative headlines about additional sanctions on Russia, as well as the chatter about higher interest rates from the Federal Reserve. By and large, it was a negative week for equities as countries revealed plans to target Russia’s energy exports. Earlier today, Japan announced that it will ban the importation of coal from Russia – the EU made a similar announcement during the week. Dealers are getting used to the idea of even higher interest rates from the Fed as US central bankers are open to hiking rates by 50 basis points in a bid to tackle rising inflation. During the week, when sentiment was low, the DAX dropped to a three-week low, while today it has bounced back, and it is up 1.4%. The FTSE 100 hit an 8-week high as banking, mining, oil, and utility stocks are gaining ground.
The US dollar traded above 100.00 for the first time since May 2020. The greenback is being dragged around by higher US yields. The yield on the US 10-year bond and the 30-year bond hit its highest mark since 2019. During the week, the minutes from the last Federal reserve meeting were posted, and the update was hawkish, as the central bank is open to the idea of hiking rates by 0.5%, once or possibly twice, this year. USD/JPY hit is highest mark in over one week, and EUR/USD fell to a one-month low. Canada posted impressive jobs data, as the unemployment rate dropped to 5.3%, the lowest level since 1976. The Canadian dollar is rallying against most currencies thanks to the robust employment data. Despite the strong Canadian dollar, USD/CAD is flat due to the move in the US dollar.
Gold has been trading in a relatively small range recently amid low volatility. Today, the metal is up 0.5% even though traders are in risk-on mood and the US dollar was firmer until a short while ago. If the yellow metal can’t be pushed into the red on a day like this, it says a lot about the resilience of the metal.