Daily Market Outlook, April 21, 2022

Overnight Headlines

Equity markets are mostly higher during the Asian trading session, including Japan’s Nikkei 225 which is up more than 1%. US Treasury yields fell yesterday, although they are slightly higher overnight. European and US equity futures are also trading higher. However, Chinese indices are again underperforming after President Xi emphasised the country’s zero-Covid policy rather than stimulus measures.

The only notable economic data release this morning is the final estimate of Eurozone March CPI inflation. It is expected to confirm the surge in the headline measure to 7.5%y/y, while the core measure (excluding food and energy) is somewhat lower but still up at 3.0%y/y. Despite increasing downside risks to economic growth, these uncomfortably high inflation levels mean the ECB is winding down its QE programme with a likely end in Q3, possibly as early as July. That would pave the way for the start of higher interest rates soon after. Yesterday, Bundesbank President Nagel warned that a return to 2% inflation is looking increasingly unlikely and suggested that QE could be stopped at the end of Q2. This afternoon’s Eurozone consumer confidence release is expected to show another decline.

US data releases include the latest weekly jobless claims and the Philadelphia Fed regional manufacturing survey. Initial jobless claims are expected to stay below 200k, reinforcing signs of a strong labour market which is helping to provide some offset from high inflation for the consumer. For the Philly Fed survey, look for a moderation in the headline index to 22.0 in April from 27.4. The survey will be watched for signs of worsening supply-chain disruptions. Yesterday’s Fed Beige Book reported moderate growth but also risks from geopolitics and inflation.

Most market interest will perhaps be reserved for appearances of some key central bank heads as they focus on reducing inflation. US Federal Reserve Chairman Powell and ECB President Lagarde will participate on an IMF panel debate on the global economy. At separate events, Bank of England Governor Bailey will discuss economic and monetary policy, while fellow MPC member Mann will give a speech on monetary policy in an uncertain environment.

There are a couple of important UK releases early Friday. The latest GfK consumer confidence report is expected to show another fall in the headline index to -33 in April from 31, which would be a fifth successive decline to the lowest level since November 2020. Official UK retail sales figures will provide a further steer on whether consumer spending is slowing. Look for a decline, which would be the third drop in the last four months.

EUR/USD: 1.0700 (920M), 1.0725 (347M), 1.0790-00 (1.1BLN) 1.0875 (363M), 1.0900-05 (3.3BLN), 1.0925 (478M) 1.0950 (232M)
USD/JPY: 127.00 (366M), 128.00 (231M)
GBP/USD: 1.2945-50 (710M), 1.3050 (868M)
AUD/USD: 0.7405-10 (290M), 0.7415-20 (630M), 0.7500 (417M)
NZD/USD: 0.6695-00 (386M)
USD/CAD: 1.2500 (1.36BLN), 1.2535 (230M), 1.2600-05 (290M) 1.2615-20 (315M), 1.2640-50 (745M)

EURUSD Bias: Bearish below 1.12 Bullish above

GBPUSD Bias: Bearish below 1.3350 Bullish above.

USDJPY Bias: Bullish above 120 Bearish below

AUDUSD Bias: Bullish above .7300 Bearish below

Moves lower as NZD/USD fall and broad USD strength weigh
AUD/USD opened 1.0% higher at 0.7451 after easing US yields weighed on USD
Softer than expected NZ CPI sent NZD/USD lower and AUD/USD fell in sympathy
AUD/USD fells to 0.7427 before bouncing back to 0.7442
It came under pressure again when US yields moved higher in Asia and supported USD
AUD/USD traded to 0.7421 before steadying above 0.7425
Support is at the 10-day MA at 0.7420 and break shifts pressure to the downside
Resistance is at the 38.2 of 0.7661/0.7343 at 0.7464 and 21-day MA at 0.7469