USD Slides, Stocks Vulnerable to Profit Taking
25 March 2022
After yesterday's rally, some profit-taking was observed in the risk assets, with the US dollar easing against the euro and the yen.
The EURUSD pair has been stuck near the 1.10 threshold this week. On the other hand, the USDJPY pair was bid every day, rising to the highest level since the winter of 2015. Since the USDJPY pair seems heavily overbought, we can expect a correction in the following days.
Elsewhere, German IFO showed a negative picture in the EU's largest economy. The business climate dropped to 90.8 from 98.5 previously (likely due to high inflation and war in Ukraine), while the expectations index fell from 98.4 to 85.1.
Later in the session, the US pending home sales for February are due, along with the University of Michigan's final Consumer Sentiment Index for March. Additionally, several FOMC policymakers, including New York Fed President John Williams and Fed Governor Christopher Waller, will be delivering speeches ahead of the weekend.
Yesterday's US durable goods orders for February crashed and came out way below expectations, printing -2.2% from 1.6% previously (against -0.5% consensus). The ex-defense and ex-transportation indices also weakened sharply. It looks like the US economy (and the global economy) are heading into a stagflationary period, meaning high (possibly double-digit) inflation and low (or negative) economic growth.
On Thursday, global stock markets experienced another joyful day as US benchmarks jumped to new swing highs, but EU indices were not so bullish. In addition, US yields continue in their uptrend as the markets are starting to expect a 50 bps rate hike at the Fed's next meeting in April.