Markets flee risk assets

Powell sights his eyes on a 50bps rate hike

Yesterday Jerome Powell confirmed exactly what traders have been betting on for weeks, although slightly dovish compared to the 75bps hike expectation; he confirmed that a “50bps hike will be on the table for the May meeting”. This sent the DXY above the 100.00 mark once again and sent its counterpart G7 currencies lower with the eurodollar well below the 1.08500 level and cable back below 1.30500.

The markets are pricing in two 50bps hikes in both May and June with possibilities of a 75bps July hike if need be. Powell’s comments sent U.S equities lower after seeing gains earlier in the day.

ECB Inflation print release

Inflation in the Eurozone came in lower than expected at 7.4% vs 7.5% YoY for March with core lower as well at 2.9% vs 3.0%. President Lagarde spoke yesterday mentioning that the June ECB meeting will be “key” for the end of their asset purchase program and potentially the beginning of their rate hikes.

This however failed to have any effect on euro rates across the board.

Negative Retail sales in the UK

A negative print for retail sales in the UK pushed the pound lower as the squeeze in income felt by citizens caused a hesitation to open their wallets. As energy prices, food prices and other essential living costs increase for the UK citizen; a cut back in retail is expected as consumers now will only look to purchase consumer staple products.