Daily Market Update

Dollar Down Even As Stocks Continue to Fall 

May 19, 2022

The U.S. dollar rallied throughout the day yesterday as global stocks dumped value. 

Overview

The S&P 500 had its biggest single-day drop since the summer of 2020.  Bloomberg News points out that 1.5 trillion dollars of market value were erased from U.S. equities yesterday.  Equity markets around the globe are all deeply in the red, but the U.S. dollar has given up some of its gains from yesterday’s session.  The Bloomberg Dollar Index is down 0.5% from yesterday. Weekly jobless claims ticked higher to 218K last week but continuing jobless claims fell slightly highlighting the continued tight job market. A separate report showed that the business outlook in the Philadelphia Fed region tipped lower.  The prints have not had any material effect on the greenback.  Existing home sales are due out at 10 a.m. and the Fed’s Kashkari will speak later this afternoon.

 

What to Watch Today…

  • Existing Home Sales at 10 a.m.

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EUR

EUR/USD has seesawed this week with nearly 1% gains and losses the new norm, apparently.  The Euro gained a percent against the dollar on Tuesday before giving back nearly all those gains yesterday.  The Euro is up 0.6% so far today.  Back and forth we go. The minutes of the latest European Central Bank meeting were released a few moments ago.  Traders will pore over the text for clues as to when the central bank will execute its first interest rate hike.  More importantly, we will be looking for hints as to how many rate hikes they see over the medium term. At first glance, it appears that some ECB officials wanted to act “without undue delay.”  The relatively hawkish sentiment has allowed the Euro to keep its overnight bounce versus the greenback.

 

AUD

The Australian dollar is also recovering from steep losses yesterday.  The Aussie is up 0.8% this morning following data that showed Australian unemployment fell to the lowest level in almost five decades.  The jobless rate registered at 3.9%, the lowest since August 1974.  The print will boost bets that the Reserve Bank of Australia will hike interest rates by 50 basis points next month.  Markets were previously pricing in a 60% chance for a 50-basis point hike and a 40% chance of a 25-basis point bump.

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