The Weekly Wrap – Fed Monetary Policy Sinks Riskier Assets

pWhile it was a busy week on the a hrefhttps:www.fxempire.comtoolseconomiccalendareconomic calendara for the week ending May 6, 2022, the Fed monetary policy decision was the main event.p

pA total of 62 stats were monitored, following 56 stats in the week prior.pdivdivdiv classBodysc17zpet90 cdBBJodiv

pOf the 62 stats, 25 beat forecasts, with 30 economic indicators falling short of forecast. Seven stats were in line with forecasts.p

pLooking at the numbers, 20 of the stats reflected an upward trend. Of the remaining 42 stats, 36 stats were weaker.p

divdivdiv classBodysc17zpet90 cdBBJodivh2 idoutoftheusOut of the USh2

pPrivate sector PMIs were the key stats in the week ahead of nonfarm payroll numbers on Friday.p

pThe numbers were mixed, with private sector PMI figures disappointing.p

pIn April, the ISM Manufacturing PMI fell from 57.1 to 55.4, with the NonManufacturing PMI down from 58.3 to 57.1.p

pLabor market numbers were also dollar negative ahead of the NFP numbers. The ADP reported a 247k increase in nonfarm payrolls for April, falling short of forecasts, and a 479k rise in March.p

pFor the week ending April 29, initial jobless claims increased from 181k to 200k.p

pOn Friday, the stats were dollar neutral. Nonfarm payrolls increased by 428k in April, following a 428k rise in March. As a result, the US unemployment rate held steady at 3.6.p

pWhile the stats were of interest, the Fed monetary policy decision and forward guidance were the key drivers in the week.p

pOn Wednesday, the Fed delivered a 50 basis point rate hike, which was in line with forecasts. Fed Chair Powell also looked to calm the markets by assuring that 75 basis point hikes would not be on the table.p

pRelief was brief, with jitters over inflation and Fed policy returning in the second half of the week.p

pIn the week ending May 6, 2022, the Dollar Spot Index rose by 0.68 to end the week at 103.660. In the week prior, the Index rallied by 1.72 to 102.959.p

h2 idoutoftheukOut of the UKh2

pIt was a quiet week, with stats limited to finalized private sector PMIs. The numbers were GBP positive, with the allimportant services PMI revised up from 58.3 to 58.9. Despite the upward revision, the PMI was still down from March 62.6.p

pOn the monetary policy front, the Bank of England was in action. On Thursday. The BoE lifted rates by 25 basis points to 1.00.p

pThe rate hike came despite concerns over the economic outlook. However, risk aversion offset any monetary policy moves to leave the pound in the red.p

pIn the week, the a hrefhttps:www.fxempire.comcurrenciesgbpusdpounda slid by 1.79 to end the week at 1.2348. The pound tumbled by 2.07 to 1.2573 in the week prior.p

pThe FTSE100 ended the week down 2.08, reversing a 0.30 gain from the previous week.p

h2 idoutoftheeurozoneOut of the Eurozoneh2

pThe German economy and private sector PMIs were the areas of focus.p

pIt was a mixed set of numbers, with economic data from Germany disappointing.p

pIn March, German retail sales unexpectedly fell by 0.1 versus a forecasted 0.3 increase. Unemployment also fell more slowly, leaving the German unemployment rate at 5.0.p

pTrade, factory orders, and industrial production figures also sounded the alarm bells.p

pGermanys trade surplus narrowed from €11.1bn to €3.2bn, with factory orders tumbling by 4.7.p

pIndustrial production was not much better, sliding by 3.9, to reflect the impact of the war in Ukraine and lockdown measures in China.p

pPrivate sector PMIs were also negative, with the Eurozones manufacturing PMI falling to a 15month low of 55.5. Easing lockdown measures provided some relief, with the Eurozone services PMI rising from 55.6 to 57.7 in April.p

pFor the week, the a hrefhttps:www.fxempire.comcurrencieseurusdEURa rose by 0.06 to 1.0551. In the previous week, the EUR tumbled by 2.27 to 1.0545.p

pThe DAX fell by 3.00, with the EuroStoxx600 and the CAC40 seeing losses of 4.55 and 4.21, respectively.p

h3 idfortheloonieFor the Loonieh3

pKey stats included trade and employment figures for March and April, respectively.p

pThe stats were mixed. Canadas trade surplus narrowed from C3.08bn to C2.49bn.p

pEmployment figures were Loonie positive, with the unemployment rate falling from 5.3 to 5.2 in April. In the month, employment increased by 15.3k, following a 72.5k surge in March.p

pIn the week ending May 6, the a hrefhttps:www.fxempire.comcurrenciesusdcadLooniea slipped by 0.21 to C1.1.2875 against the greenback. The Loonie slid by 1.09 to C1.2848 in the week prior.p

h2 idelsewhereElsewhereh2

pIt was a mixed week for the a hrefhttps:www.fxempire.comcurrenciesaudusdAussie Dollara and the a hrefhttps:www.fxempire.comcurrenciesnzdusdKiwi Dollara.p

pThe Aussie Dollar rose by 0.21 to 0.7076, while the Kiwi Dollar fell by 0.74 to end the week at 0.6410.p

h3 idfortheaussiedollarFor the Aussie Dollarh3

pPositive stats failed to support the Aussie, with the markets also brushing aside an RBA rate hike.p

pKey stats included retail sales and trade data for March. Retail sales increased by 1.6, with the trade surplus widening from A7.457bn to A9.314bn.p

pEarly in the week, the RBA raised cash rates by 25 basis points to 0.35 versus a forecasted 0.25. Monetary policy divergence remained firmly in the favor of the greenback, however.p

h3 idforthekiwidollarFor the Kiwi Dollarh3

pA quiet week left the markets to consider employment change figures and the RBNZ financial stability report.p

pIn Q1, the New Zealand unemployment rate held steady at 3.2, with employment rising by 0.1 in the quarter.p

pThe RBNZ provided little Kiwi dollar support in the week, however, with the RBNZ talking of a possible house price correction.p

pRising prospects of a house price correction could test the RBNZs appetite to lift cash rates at a more aggressive pace.p

pMonetary policy diversion with the Fed left the Kiwi on the back foot.p

h3 idforthejapaneseyenFor the Japanese Yenh3

pEconomic data was limited to inflation figures. There was little support for the Yen, however, despite a pickup in inflationary pressure.p

pIn April, Tokyos annual core rate of inflation accelerated from 0.8 to 1.9.p

pThe a hrefhttps:www.fxempire.comcurrenciesusdjpyJapanese Yena fell by 0.66 to end the week at ¥130.56 against the dollar. In the week prior, the Yen ended the week down by 0.93 to ¥129.70.p

h3 idoutofchinaOut of Chinah3

pIt was a particularly quiet week, with service sector PMI numbers for April in focus.p

pThe Caixin Services PMI slid from 42.0 to 36.2, with COVID19 lockdown measures weighing on service sector activity.p

pIn the week ending May 6, the Chinese Yuan declined by 0.88 to CNY6.6667. The Yuan slid by 1.65 to CNY6.6085 in the week prior.p

pThe Hang Seng Index ended the week down 5.16, with the CSI300 falling by 2.67.p