The strongest to weakest of the major currencies
The EUR is the strongest and the CHF is the weakest as the NA session begins. The EU PPI came in at +31.4% YoY (yikes) as supply chain shocks and now the Ukraine war continue to push those prices. The good news is the expectations were higher at 31.5%.
The USD is mostly higher as the market continues to digest the Brainard comments yesterday where she called for faster taper and higher rates to contain inflation. The FOMC meeting minutes will be released later today with the focus on the taper. The market expects the Fed to tighten by 50 bp increments as they accelerate the tightening process now. Fed’s Harker is expected to speak today. The economic calendar in the US is bare, but the weekly oil inventory data will be released at 10:30 AM ET.
The private data late yesterday showed
Expectations
Headline crude -2.1M barrels
Gasoline +0.1M
Distillates -0.8M
A snapshot of the markets as North American traders enter for the day shows:
Spotgoldis trading down $2.60 or -0.15% at $1920.57
Spotsilver is trading down $0.14 or -0.57% at $24.18
Spotcrude oilis trading up $1.17 or 1.15% at $103.11
Bitcoinis trading at $44,905 that’s down around $600 on the day
In the premarket for US stocks, the majorindicesare trading lower. The majorindices snapped a two day win streak yesterday with the NASDAQ index leading the declines with a -2.26% decline
Dow industrial average down -226 points after yesterday’s -280.7 point decline
S&P index down -43 points after yesterday’s -57.52 point decline
NASDAQindex is down -227 points after yesterday’s -328.39 point decline
In the European equity markets, the majorindicesare moving sharply lower along with other indices as inflation fears tick up
German DAX, -1.9%
France’s CAC, -1.9%
UK’s FTSE 100 -0.3%
Spain’s Ibex, -1.6%
Italy’s FTSE MIB -1.6%
In the US debt market, US yields are continuing it’s run to the upside as the Fed is expected to go full speed ahead in May with balance sheet reduction and 50 basis point rate hikes. The yield curve
Yield Curve
A yield curve is a line used to help determine interest rates of interest rates for a specific bond, differentiated by contract lengths. This is useful for contrasting maturity dates, for example 1 month, 1 year, etc.In particular, yield curves help underscore the relationship between interest rates or borrowing costs and the time to maturity.Some of the best examples of this include US Treasury Securities, which are among some of the most observed worldwide by traders. By determining the slope of yield curves, it is possible to plot or predict future interest rate changes. There are three types of yield curves that are primarily studied, classified as normal, inverted, or flat.Why are Yield Curves Important?Yield curves like other benchmarks help investors and analysts ascertain more information about specific constructs affecting financial markets.For example, a normal or upward sloping curve points to economic expansion. Expectations of yields becoming higher in the future help attract funds in shorter-term securities with the hopes of purchasing longer-term bonds later, for a higher yield.The opposite is true in the case of an inverted or downward sloping curve, which traditionally points to an economic recession. If yields are expected to eventually be lower, investors opt to purchase longer-term bonds to help price in yields before further decreases occur.Subsequently, these are predictive of economic output and growth and are thus instrumental in financial analysis.These curves are also utilized primarily as a barometer for other forms of debt in a market, including bank lending rates, mortgage rates, and other benchmarks.The most reported yield curves deal with US Treasury debt, comparing the 3-month, 2-year, 5-year, 10-year and 30-year intervals. This information is published daily.
A yield curve is a line used to help determine interest rates of interest rates for a specific bond, differentiated by contract lengths. This is useful for contrasting maturity dates, for example 1 month, 1 year, etc.In particular, yield curves help underscore the relationship between interest rates or borrowing costs and the time to maturity.Some of the best examples of this include US Treasury Securities, which are among some of the most observed worldwide by traders. By determining the slope of yield curves, it is possible to plot or predict future interest rate changes. There are three types of yield curves that are primarily studied, classified as normal, inverted, or flat.Why are Yield Curves Important?Yield curves like other benchmarks help investors and analysts ascertain more information about specific constructs affecting financial markets.For example, a normal or upward sloping curve points to economic expansion. Expectations of yields becoming higher in the future help attract funds in shorter-term securities with the hopes of purchasing longer-term bonds later, for a higher yield.The opposite is true in the case of an inverted or downward sloping curve, which traditionally points to an economic recession. If yields are expected to eventually be lower, investors opt to purchase longer-term bonds to help price in yields before further decreases occur.Subsequently, these are predictive of economic output and growth and are thus instrumental in financial analysis.These curves are also utilized primarily as a barometer for other forms of debt in a market, including bank lending rates, mortgage rates, and other benchmarks.The most reported yield curves deal with US Treasury debt, comparing the 3-month, 2-year, 5-year, 10-year and 30-year intervals. This information is published daily.
Read this Term is steepening as the longer end moves higher:
US yields are higher
The European debt market yields are also sharply higher on inflation
Inflation
Inflation is defined as a quantitative measure of the rate in which the average price level of goods and services in an economy or country increases over a period of time. It is the rise in the general level of prices where a given currency effectively buys less than it did in prior periods.In terms of assessing the strength or currencies, and by extension foreign exchange, inflation or measures of it are extremely influential. Inflation stems from the overall creation of money. This money is measured by the level of the total money supply of a specific currency, for example the US dollar, which is constantly increasing. However, an increase in the money supply does not necessarily mean that there is inflation. What leads to inflation is a faster increase in the money supply in relation to the wealth produced (measured with GDP). As such, this generates pressure of demand on a supply that does not increase at the same rate. The consumer price index then increases, generating inflation.How Does Inflation Affect Forex?The level of inflation has a direct impact on the exchange rate between two currencies on several levels.This includes purchasing power parity, which attempts to compare different purchasing powers of each country according to the general price level. In doing so, this makes it possible to determine the country with the most expensive cost of living.The currency with the higher inflation rate consequently loses value and depreciates, while the currency with the lower inflation rate appreciates on the forex market.Interest rates are also impacted. Inflation rates that are too high push interest rates up, which has the effect of depreciating the currency on foreign exchange. Conversely, inflation that is too low (or deflation) pushes interest rates down, which has the effect of appreciating the currency on the forex market.
Inflation is defined as a quantitative measure of the rate in which the average price level of goods and services in an economy or country increases over a period of time. It is the rise in the general level of prices where a given currency effectively buys less than it did in prior periods.In terms of assessing the strength or currencies, and by extension foreign exchange, inflation or measures of it are extremely influential. Inflation stems from the overall creation of money. This money is measured by the level of the total money supply of a specific currency, for example the US dollar, which is constantly increasing. However, an increase in the money supply does not necessarily mean that there is inflation. What leads to inflation is a faster increase in the money supply in relation to the wealth produced (measured with GDP). As such, this generates pressure of demand on a supply that does not increase at the same rate. The consumer price index then increases, generating inflation.How Does Inflation Affect Forex?The level of inflation has a direct impact on the exchange rate between two currencies on several levels.This includes purchasing power parity, which attempts to compare different purchasing powers of each country according to the general price level. In doing so, this makes it possible to determine the country with the most expensive cost of living.The currency with the higher inflation rate consequently loses value and depreciates, while the currency with the lower inflation rate appreciates on the forex market.Interest rates are also impacted. Inflation rates that are too high push interest rates up, which has the effect of depreciating the currency on foreign exchange. Conversely, inflation that is too low (or deflation) pushes interest rates down, which has the effect of appreciating the currency on the forex market.
Read this Term fears. The German/French yield has moved higher as Macron lead vs LePen is narrowing. LePen is anti-EU.
European 10 year yields are higher
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