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The German ZEW economic sentiment index improved to -34.3 for May from -41.0 the previous month and slightly stronger than consensus forecasts of -42.0. The current conditions index, however, dipped to -36.5 for the month from -30.8 and slightly weaker than expected. The Euro-zone index posted a stronger recovery to -29.5 from -43.0 in March and stronger than expected as overall Euro-zone vulnerability to the Ukraine crisis is perceived as slightly lower.

Bundesbank President Nagel stated that the inflation trend is disturbing and that it is also gaining momentum. He added that the ECB should raise rates in July if incoming data confirms that inflation is too high and that the risks of acting too late are increasing. He also warned that price expectations could become less anchored.

The Euro struggled to make any headway amid ongoing concerns surrounding the Euro-zone outlook, but it resisted a further test of the 1.0500 area.

The US NFIB small-business confidence index was unchanged at 93.2 for April and marginally above expectations. There were still impart concerns surrounding cost pressures and inflation with 32% of businesses reporting that inflation was their most pressing problem, the highest proportion since 1980.

Consolidation was the underlying theme during the day with the dollar maintaining a strong underlying tone against European currencies. There was further consolidation on Wednesday ahead of the US consumer prices data with the Euro edging higher to 1.0545 as risk appetite stabilised.




The dollar was held in tight ranges ahead of Tuesday’s New York open as it traded around 130.0 against the yen amid nervous trading in US equity futures.

New York Fed President Williams stated that the central bank will move expeditiously to bring interest rates back to more normal levels. He stated that the US has a sizzling hot labour market while the central bank needs to be data dependent and adjust policy actions as circumstances warrant. He added that 50 basis-point rate hikes at the next two policy meetings makes sense as a base case while the Fed can certainly move above neutral if necessary. Richmond head Barkin stated that inflation was high, persistent and broad based. The Fed will get to neutral and then decide if the central bank needs to put the brakes on.

Cleveland Fed President Mester stated that she thought the central bank would need to go beyond neutral and that she would need compelling evidence that inflation is moving down. She added that there may be another quarter of negative growth and that unemployment may need to rise to bring inflation down.

US equites posted strong gains in early trading, but there was choppy trading with major indices closing only slightly higher after a slide into the red during the session.

Treasuries posted further solid gains during the day with a significant element of defensive demand and the 10-year yield dipped to around 2.95%

The dollar was unable to hold above 130.50 and retreated to near 130.0 as equities moved lower. Asian equities were able to post net gains on Wednesday amid hopes for slightly more positive developments surrounding coronavirus trends in Shanghai and the dollar settled around 130.30 with the Euro around 137.40.




Overall Sterling sentiment remained weak amid on-going fears surrounding the outlook and important concerns surrounding the outlook for consumer spending, especially given the pressure from higher energy costs. There were also further expectations that Bank of England interest rates are already close to a peak.

Brexit tensions added to negative sentiment towards the UK currency with fresh reports that the UK was preparing legislation to breach treaty obligations under the Northern Ireland protocol. Although risk appetite attempted to recover during the day, a fresh slide on Wall Street soured sentiment towards the European close. Sterling was unable to sustain a recovery against the dollar and retreated to just below 1.2300 before finding some support. The Euro settled little changed around 0.8550.  

The NIESR forecast that the UK would endure a technical recession in the second half of 2022, but also called for additional support measures for the poorest households. Sterling edged higher on Wednesday amid a slightly less defensive tone surrounding risk appetite, but overall confidence remained vulnerable.




The Swiss franc was able to resist further selling pressure on Tuesday with an easing of upward pressure on global yields limiting potential selling, especially when risk appetite dipped again. Markets were continuing to monitor any National Bank rhetoric on franc policy.

The Euro settled around 1.0480 after failing to hold above 1.0500 while the dollar settled just below 0.9950 after briefly posting a fresh 26-month high around 0.9975.

The franc was held in tight ranges on Wednesday with markets monitoring risk and yield trends and the dollar traded just below 0.9950.


Technical Levels 




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