USD strengthens, stocks under pressure amid inflation fears
The US dollar continues to move higher after the start of the US session. One of the reasons behind this move may be the S&P Global PMI report which showed broadening service sector inflation which is certainly not good news for the Fed. Expectations regarding more aggressive tightening puts pressure on stocks and precious metals and keeps Treasury yields elevated. At the moment the market sees a 9.5% chance of a 75 bps hike at the May meeting even though Powell assured that such increase is unlikely. Beyond that, there's now a nearly 30% chance of a 50 bps hike followed by 75 bps on June 15. Also investors have also priced in 1.75-2.00% Fed funds at the July meeting.
Another reason for today's market movements, and especially the strengthening of the dollar, are the upcoming presidential elections in France. It seems that many investors are trying to hedge against the potential victory of Marine Le Pen, which could seriously harm European integration. Le Pen's win could cause more volatile reactions in the markets, similarly to Brexit referendum or Trump's presidential election win.
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AUDUSD pair broke below major support around 0.7340 which coincides with lower limit of the wedge formation, previous price reactions and 50 SMA (green line). If current sentiment prevails, downward move may accelerate towards next support at 0.7200 marked with a lower limit of the 1:1 structure. Source: xStation5
US2000 is testing key support at 1967 pts which previously managed to fend off the market bears. Source: xStation5
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