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The Euro-zone Sentix investor confidence index retreated to -22.6 for May from -18.0 previously and weaker than consensus forecasts of -20.8.

The dollar overall maintained a strong tone in early Europe, especially with commodity currencies remaining under heavy pressure. Underlying Euro-zone sentiment also remained weak during Monday, but Euro was able to find support below the 1.0500 level and another failure to hold it below this level triggered a round of short covering

Minneapolis Fed President Kashkari stated that the Fed will change its approach if the data comes in differently and there was some evidence that inflation was softening just a hair. Atlanta Fed President Bostic stated that 50 basis-point increases are pretty aggressive and that the Fed can stay at this pace with no need for 75 basis-point increases. He added that the Fed Funds rate needs to be in a range of 2-2.5% by the end of 2022.

There were some concerns that weaker equity markets would undermine the US outlook and speculation that this could trigger at least a limited reassessment by the Fed. The Euro strengthened to highs above 1.0570 before faltering again with a decline to 1.0530 at the European close.

The dollar lost some ground as US yields moved lower and there was a further element of Euro short covering on Tuesday with the single currency close to 1.0575.




The latest New York Federal Reserve survey recorded a decline in 1-year inflation expectations to 6.3% from 6.6%, although the 3-year component increased to 3.9% from 3.7%. The Conference Board employment trends index retreated to 120.2 from 120.6 previously.

US Treasures regained some ground ahead of the New York open and secured a further advance after the Wall Street open, especially with a further slide in US indices with the S&P 500 index sliding to 13-month lows and an 18-month low for the Nasdaq index.

The yen also gained an element of defensive support as risk appetite continued to deteriorate amid heavy losses in equites. In this environment, the dollar retreated from 20-year highs around 131.35 to trade around 130.20 towards the European close and failed to recover into the US close.

Japanese finance ministry Suzuki stated that forex stability is important and rapid moves are undesirable, but there was no evidence of a change in Bank of Japan policy at this stage. Overall confidence in the Chinese outlook remained very fragile on Tuesday with further stresses in the property sector. The dollar dipped below the 130.00 level as equities retreated further, but there was a tentative risk rebound later in the session with the dollar recovering to near 130.50 as equity futures attempted to rally.




Sterling was subjected to further selling pressure after Monday’s European open amid further domestic and global pressures. Confidence in the UK economy remains notably weak and the further slide in risk appetite was also crucial in undermining UK currency support. Sterling dipped to fresh 22-month lows close to 1.2260 against the dollar, but there was an aggressive round of short covering amid evidence that the UK currency was over-sold after very heavy losses.

Bank of England MPC member Saunders stated that key measures of longer-term inflation expectations are uncomfortably high and that a process of de-anchoring expectations would be very costly in economic terms. In this context, the bank should lean heavily and the risk of higher inflation becoming embedded and that he wanted to move quickly to a more neutral stance. He added that an estimate of the neutral rate is between 1.25-2.50%, but he did not back a rate increase of 75 basis points at the latest policy meeting with the choice seen as between 25 and 50 basis points. Overall confidence in the UK outlook remained very fragile.

Sterling recovered to highs just above 1.2400 against the dollar, but failed to sustain the advance and retreated steadily back to near 1.2300.

BRC data recorded a 1.7% decline in like-for-like sales in the year to April and there were further concerns over Brexit developments. Risk trends tended to dominate and a very fragile recovery allowed Sterling to recover to near 1.2360 on Tuesday with the Euro around 0.8555 as overall Sterling sentiment remained weak.




According to the latest data, total Swiss sight deposits increased to CHF750.9bn in the latest week from CHF744.4bn previously. The notable increase for the week suggests that the National Bank had been intervening more aggressively to help push the franc weaker.

The franc was again unable to gain support from the slide in risk appetite with the currency undermined by higher global yields. The Euro strengthened further to highs near 1.05 while the dollar posted a fresh 26-month high around 0.9965. The dollar retreated to around 0.9920 on Tuesday with the franc maintaining a fragile tone.


Technical Levels 




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