Volatility Continues, US Equity Indices Drop to New Cycle Lows
17 June 2022
Yesterday's trading continued in a bearish mood, pushing the US stock benchmarks to new cycle lows, confirming the bearish trend.
On the other hand, the US dollar plunged sharply in a rather unusual directional movement as the greenback tends to appreciate during sell-offs in equity markets.
Central banks dominating markets
Later today, Federal Reserve Chair Jerome Powell is due to deliver welcoming remarks at the Inaugural Conference on the International Roles of the US Dollar in Washington DC. However, his speech should not be about the current monetary policy, thus, there should be only a limited impact on the markets.
Earlier in the week, the Swiss National Bank unexpectedly increased rates by 50 basis points on Thursday, the Bank of England increased interest rates by 25 basis points on the same day, and the US Federal Reserve stated on Wednesday that it will raise rates by 75 basis points, the highest rise since 1994.
On the other hand, the Bank of Japan's decision brought no tightening as the central bank said on Friday that it has not modified the parameters of its monetary policy. The BoJ emphasized in its policy statement that it will continue to closely monitor FX market movements and their effects on Japan's economic activity. As a result, the JPY plunged, pushing the USDJPY pair nearly 2% higher to 134.50.
Later today, consumer prices (CPI) in the Eurozone are predicted to increase by 0.8% in May, making them 8.1% higher than they were in May last year. However, these numbers are only revisions of preliminary data released earlier in the month, thus, no volatility is expected afterward.