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18.05.2022 08:30

Fedspeak favors US Treasury yields but S&P 500 Futures struggle to track Wall Street’s gains

  • Global markets stabilize as risk-on mood fades amid hawkish Fedspeak, light calendar.
  • Fed’s Evans pushes for faster rate hikes to reach 2.25-2.5% neutral range.
  • Fed Chairman Powell, Bullard backed 50 bps but firmer data favored yields.
  • China’s covid optimism, recently upbeat data across the globe underpinned positive sentiment of late.

Having witnessed an upbeat start to the week, trading sentiment eased during the mid-Asian session on Wednesday as a lack of major catalyst, as well as hawkish comments from the Fed official, challenged previous optimism.

Amid these plays, the Wall Street benchmarks closed positive even if the US 10-year Treasury yields rose nearly 10 bps to 2.99% at the latest. The S&P 500 Futures struggle, however, around 4,090 by the press time.

That said, recent comments from Chicago Fed President Charles Evans seem to have weighed on the market’s mood by renewing fears of a faster rate hike as the policymaker said, “(the Fed) Should raise rates to 2.25%-2.5% neutral range 'expeditiously'.” On Tuesday, Fed Chair Jerome Powell and a generally-hawkish St Louis Fed President James Bullard pushed for a 50 bps rate hike and weighed on the USD.

Also weighing on the market’s mood is the news, shared by Reuters, suggesting that the European Commission is up for releasing plans to escape route from Russian fossil fuels.

It’s worth noting that Shanghai’s plans for unlock, after witnessing a three-day streak of zero covid cases outside the quarantine area, joined the dragon nation’s readiness for further infrastructure spending to underpin market optimism the previous day.

On the same line were firmer Eurozone GDP and the US Retail Sales figures that shrug off growth concerns. The preliminary Eurozone GDP for Q1 2022. The bloc’s GDP rose past 5.0% YoY to 5.1% while also rising above 0.2% QoQ expectations to 0.3%. On the other hand, the US Retail Sales rose at a pace of 0.9% MoM in April, slightly better than the expected pace of 0.7% but softer than the upwardly revised 1.4% growth (from 0.5%).

Recently, Japan’s preliminary readings of Q1 2022 GDP rose past -0.4% expectations to -0.2% QoQ whereas the Annualized GDP improved to -1.0% versus -1.8% forecasted.

Moving on, headlines concerning covid, geopolitics and growth become crucial for short-term directions amid a light calendar day ahead, except for inflation numbers from Eurozone and Canada, not to forget second-tier housing data from the US.

Also read: Forex Today: Dollar extends its decline as sentiment improves


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