Markets US equities were weaker Wednesday, S&P down 0.7%. US10yr yields up 6bps to 2.91%. Bunds up 6bps as well, to 1.18%.  Equities are trading lower again as the employment piece of ISM manufacturing contracted and the prices paid component remains elevated. If investors did not take kindly to Tuesday's higher than expected inflation print in the Eurozone, they were mortified by the sticky US inflation print as the devil is always in the ISM data details. Higher than expected inflation, good new orders and mixed employment data are the perfect cocktails for the market to price in a higher US terminal rate scenario.  Anything that keeps the Fed on a more aggressive rate-hiking path will pull the rug from under any semblance of sure-footed equity markets.  With the FED hikes back on the boil. I expect the Chinese markets to continue shedding recent gains, particularly in the tech sector.   Oil Traders are debating if the likes of Saudi Arabia are becoming worried about demand destruction or, at least, want to reset relations with the US by opening up the doors to swing producers to pump more oil. OPEC and non-OPEC members are meeting later today in a discussion framed by Russia missing its production quota for several months. An OPEC meeting that drives oil prices higher would likely elicit an economic consequences trade, especially around the global end-demand outlook; hence I think the bounce would be capped in this risk-off environment. HOWEVER, an OPEC supply-driven lower oil price reaction would be a godsend to international risk markets, especially in Europe. So, the million-dollar question is, can OPEC even offset lost Russian production.  While several OPEC+ members have struggled to increase production in recent months, Saudi production has moved steadily upwards – from ~8.1mb/d in March 2021 to 10.3mb/d in April this year, according to OPEC's latest monthly report, but remains well below total theoretical capacity. Similarly, Kuwait, Iraq and the UAE have managed to raise production and are below theoretical capacity.  Given that OPEC tends to respond at a snail's pace to market developments, there was a lot of skepticism in the oil price prices overnight, suggesting the market is still erring in the base case camp. But the potential for a shift in strategy and quotas does bring a new downside risk for oil that has not received much focus until now. But hold on to your hats; it could be a wild ride on the oil market roller coaster today, especially if OPEC signals more barrels are on the way.

Outlook: This is a big data day, starting with the manufacturing PMI, the ISM version, JOLTS, the BoC and the Beige Book, among other events. Earlier we will have gotten some PMIs from Europe. The overall sense is that economies are doing better than expected or at least that catastrophe is being postponed. This is important because central bankers (and politicians) are making a big stink about inflation and in the background, economic conduct goes on as normally as it can. The one giant problem today is supply chains, getting the blame for inflation in energy, food, and Stuff. But now Covid is mostly behind us, supply chain problems from that source “should” be fading. It’s taking longer than some would have thought. The supply chain is not a rubber band. But it’s not a broken metal chain, either. You can still buy a new refrigerator or water purifier or t-shirts from Asia or a notebook PC or anything else, from Amazon, with free one-day delivery. We recently did all those things. With all the wailing and gnashing of teeth about the supply chain, for the average US consumer, it’s a non-event. Economically it’s a big deal (chips, autos) but not to the average Joe. This matters because US consumer sentiment is central to a big chunk of the upcoming global data. Supply issues arising from the Chinese lockdown may be easing soon, too, but honestly, no one knows. That leaves supply issues arising from the Russian invasion of Ukraine, and those are intractable. We learned more about fertilizer than we ever wanted to know. Bottom line, markets are coming to take supply issues in stride and while not exactly brushing them off, accepting that central banks can’t do anything much about supply-chain drive inflation but they are going to take action anyway. That makes the upcoming rate hikes (in Canada, for example) illogical. If a policy cannot affect the variable it targets, why use it? Ah, because government needs to be shown it’s doing something, even if it’s useless. Oh, okay, we have confidence that doing something, even if it’s the wrong something, is right. Got that? The only real problem is that policy has lags in taking effect and by the time supply chains get repaired, totally independently of monetary policy, central banks may have raised rates more than they should. Overshooting, and you never know for 3-9 months that’s what you have. This is pretty silly but it’s how things work. To some extent, we see traders retreating from the dollar because even though the relative real differential is being targeted to be the highest, it might be excessive, while the others are catching up. Let’s bet on those instead of the leader. Japan is an example. The economy is not as bad off as feared only a month ago. There is practically a zero chance of a rate hike or even a hawkish tone, and clearly the real return divergence can only grow–so why was the yen in a favored position (until today)? Relative real returns matter. They are not fully determinative but the top factor in FX pricing, followed closely by policy credibility and economic robustness. The dollar wins on all fronts. It’s fun to try to figure out why the dollar retreats sometimes in this crystal-clear situation, but in the end, those reasons have to do with crowd psychology and not economics or even history. Stay the course. Do Not Deduce Dept: Savings fell to the lowest since 2008 as consumers kept on spending. This is mildly interesting–it implies confidence in the future. But that’s about all you can deduce. You shouldn’t heed anguished cries that the consumer will stop dead in his tracks because he ran out of money. After all, this is America. We have credit cards. This is an excerpt from “The Rockefeller Morning Briefing,” which is far larger (about 10 pages). The Briefing has been published every day for over 25 years and represents experienced analysis and insight. The report offers deep background and is not intended to guide FX trading. Rockefeller produces other reports (in spot and futures) for trading purposes. To get a two-week trial of the full reports plus traders advice for only $3.95. Click here!

The USD made a solid comeback on Tuesday and prompted fresh selling around EUR/USD. Bulls seemed rather unaffected by hotter-than-expected Eurozone consumer inflation data. Investors now eye ECB Lagarde's speech for some trading impetus ahead of the US ISM PMI. The EUR/USD pair witnessed heavy selling on Tuesday and snapped a three-day winning streak to over a one-month high, around the 1.0785 region touched the previous day. The US dollar made a solid comeback amid a sharp spike in the US Treasury bond yields, bolstered by hawkish comments from Fed Governor Christopher Waller. This, in turn, was seen as a key factor that exerted downward pressure on the major. Speaking at an event in Frankfurt on Monday, Waller backed the case for a 50 bps rate hike for several meetings until inflation eases back toward the central bank’s goal. Apart from this, a generally weaker tone around the equity markets further benefitted the safe-haven greenback. The market sentiment remains fragile amid doubts that central banks can hike interest rates to curb inflation without impacting economic growth. This, along with concerns that the global supply chain disruption would push consumer prices even higher, tempered investors' appetite for riskier assets. The fears were further fueled by hot Eurozone inflation figures, which showed that the annualized Harmonised Index of Consumer Prices (HICP) hit another record high level of 8.1% in May. The data reaffirmed market bets for more aggressive rate hikes by the European Central Bank, though failed to impress bullish traders or ease the intraday bearish pressure surrounding the EUR/USD pair. Spot prices, however, managed to find some support near the 1.0680-1.0675 region and bounced over 50 pips from the daily low. The overnight late recovery lacked any follow-through buying amid sustained USD buying, which seemed unaffected by a goodish recovery in the US equity futures. Market participants now look forward to ECB President Christine Lagarde's scheduled speech for some impetus. Later during the early North American session, traders will take cues from the US economic data - ISM Manufacturing PMI and JOLTS Job Openings. Apart from this, the US bond yields and the broader market risk sentiment will influence the USD and produce some trading opportunities around the EUR/USD pair. Technical Outlook From a technical perspective, the overnight downfall found a decent support near the 38.2% Fibonacci retracement level of the 1.1185-1.0350 slide. That said, the emergence of fresh selling on Wednesday favours bearish traders. It, however, will be prudent to wait for some follow-through selling below the aforementioned support, around the 1.0680-1.0675 region, before positioning for any further decline. The EUR/USD pair might then accelerate the fall towards the 1.0625 intermediate support en-route the 1.0600 round-figure mark. The downward trajectory could further get extended towards the 23.6% Fibo. level, around mid-1.0500s. On the flip side, the 1.0775-1.0785 region, coinciding with the 50% Fibo. level, might continue to act as strong resistance. Sustained strength beyond would be seen as a fresh trigger for bullish traders, which, in turn, should allow the EUR/USD pair to surpass the 1.0800 mark and test the next relevant hurdle near the mid-1.0800s. Bulls might eventually lift spot prices to the 61.8% Fibo. level, around the 1.0880 zone, which if cleared decisively will set the stage for an extension of the recent recovery move from the YTD low.

Outlook: The calendar is stuffed full this week, with consumer sentiment a possible star in the US today–but remember that sentiment has been falling back while consumer spending remained robust, even at the expense of savings. And not to sound like a broken record, but that looming recession so many predict is still not in evidence. Last week the Atlanta Fed GDPNow came in at 1.9% for Q2. We get another one tomorrow. And the US is not alone. We get GDP from Australia and Canada this week, likely more robust than earlier feared and in the case of Canada, a cattle prod for two more fat (50 bp) hikes. The BoC remarks tomorrow could be interesting. The point: it ain’t necessarily so that relentless hikes and hawkishness–beating inflation at all costs–will crash economic activity and market sentiment at the same time. We are accustomed to the two things going together. Central bank hikes lead inexorably to the economy contracting and equities falling back, too. There is no law that says you can’t have hikes and hawkishness with the economy (meaning the consumer) fighting back with the same and nearly the same degree of activity, and the stock market seeing those higher earnings instead of seeing only economic contraction. This implies inflation lasting longer, and because capital spending will not necessarily be part of that push-back, recession can still be out there in the future–just not now. For a clutch of reasons–Shanghai re-opening, the amazing foreign policy unity in Europe, acceptance of the Fed’s hawkishness, the S&P’s retreat from bear market territory–risk sentiment is swinging its needle from panic/fear to “oh, okay.” This is not the same thing as the embrace of risk, but it’s a hole in the wall of despair. Case in point: commodities are diverging from one another instead of acting like a single massive monster. It would be rare for a market about to get punched in the jaw with the end of QE–technically, tomorrow–and massive rate hikes to keep going on the same path. But not impossible. Can it last? Maybe not. That’s a version of the soft landing and it has low probability. In FX, when in doubt about the dollar, look to the Other Dollars and also to the crossrates. If we are right about sentiment swinging to a less negative mode, the Other Dollars should be about to shine. Foreign Affairs: A TV show last week polled viewers about whether Kissinger is right that Ukraine will have to give up some territory to Russia to make Russia go away. A whopping 90%+ said “Go to hell, Henry.” So did the Polish and Ukrainian top officials, who spoke eloquently about the principles they embrace. Nobody has forgotten Kissinger’s betrayal of the Kurds. It’s not only Americans in solidarity with Ukraine–Europe’s support for Ukraine is amazing and wonderful. Putin has done what Merkel could not. It may be foolish economically to ban Russian oil in any part, but never mind–the point is not the oil or the economy. It’s solidarity. How rare for a political principle to win. Musings on the S&P: Before our emergency hiatus, we wrote that the reason we may avoid a reversal in the stock market is a stubborn refusal to enter bear territory and stay there. That turned out to be correct, but recession fear still stalks the land. On the daily chart, we easily see the downward sloping channel, happily getting a robust pushback at the moment but likely ending at the Bollinger band top (4251.56) or the channel top itself (4376.07). The Average True Range breakout indicator lies in-between at 4354.30. Notice the whole shooting match is below the cloud, a sell signal. There is only one question: what is the probability of the current rising wave continuing to break out above all these resistance levels to deliver a reversal? In FX, the answer would depend on current events, economic releases, central bank statements, etc.. We just saw it happen in dollar/yen. In the S&P, the probability is nearly zero. See the weekly chart. The dark green line is the 200-day/40 week, a meaningless number over long periods of time but still a solid sell signal to many. If enough people believe, they cause it to happen. The Fibonacci retracement lines tell the same story. The probability is high that the S&P falls to the 50% retracement (3532.96) or the 62% retracement (3212.63). Again, Fib numbers and the secrets of the universe in some magic set of numbers is nonsense, but becomes a self-fulfilling prophecy all too often. All these indicators are standard, conventional indicators that come packaged with every charting software. You can add fancier indicators but will get the same outcome–the probability of a deep dive is very, very high. The point is that is...

The Australian economy is seen growing by 0.7% in the first quarter of 2022. RBA says the Australian economy is resilient, remains upbeat on the outlook. AUD/USD has limited upside potential even on an Australian GDP beat. AUD/USD is testing bearish commitments near monthly highs in the run-up to the first quarter Australian GDP release due this Wednesday at 0130 GMT. The South Pacific Island nation’s economic activity is likely to be hit at the beginning of the year, courtesy of the Omicron covid variant outbreak and severe flooding in New South Wales (NSW) and Queensland. The Australian economy is seen expanding by 0.7% in the three months to March, on a quarterly basis, after rebounding by 3.4% in the final quarter of 2021. Meanwhile, the country’s GDP rate is seen dropping to 3.0% YoY in the reported period vs. a 4.2% sharp expansion witnessed in the previous quarter. Australia's economy staged a solid turnaround last quarter as the country emerged from its most stringent pandemic lockdowns. Q1 GDP unlikely to alter RBA’s hawkish stance Despite the impact of the further disruptions, accounting for a rocky start to the year, the Australian economic performance for the quarter ending March is unlikely to be viewed as how the economy could perform for the entire year. The economic damage due to the severe floods and the Omicron wave is likely to be a one-off event. This view is also endorsed by the Reserve Bank of Australia (RBA), as cited in the updated forecasts in May’s Statement of Monetary Policy, “the Australian economy remains resilient and is expected to grow strongly this year. GDP is forecast to expand by 4¼ percent over 2022. Growth is expected to moderate thereafter, to 2 percent over 2023.” For the first quarter GDP outcome, there is little scope for an upside surprise, as Australia’s current account surplus shrank to A$7.5 billion ($5.38 billion), well short of the forecast of A$13.4 billion. Net exports are expected to subtract 1.7 percentage points from GDP in the first quarter. On the other hand, Australian government spending jumped 2.5% in the March quarter and will make a 0.7 percentage points contribution to economic growth in the quarter. However, the net impact is likely to remain a minus for the country’s national accounts. Even as Australia experiences a meager growth, it is unlikely to alter the RBA’s hawkish shift on the monetary policy stance. The country’s solid labor market, pent-up consumer demand and elevated household saving ratio continue to paint a rosy picture of the economy for this year. Markets are pricing in another 0.25% rate hike to 0.60% at the RBA's June policy meeting next week, followed by a string of hikes to bring the OCR to around 2.5% by the end of the year. The central delivered a hawkish rate hike of 25 basis points (bps) to 0.35% as it prioritized battling the inflation monster, which reached a two-decade high of 5.1% in the first quarter. Trading AUD/USD with Australia’s GDP report The recent downward correction in the US dollar from 20-year highs has helped AUD/USD hit the highest level in four weeks just above 0.7200. A dense cluster of healthy resistance levels aligns near the 0.7240 region, which could cap the renewed upside in the aussie if the Australian GDP print beats estimates. In case, the GDP rate disappoints or comes in line with expectations, the immediate support at 0.7130 could be tested. A big downside surprise could expose Friday’s low of 0.7084 Note that the aussie’s reaction to the Australian GDP report could be also impacted by the prevalent broader market sentiment and the US dollar price action. AUD/USD: Daily chart

EUR/USD - 1.0747 Euro's intra-day strong retreat in Asia on broad-based rebound in usd suggests recent corrective upmove from May's 5-year bottom at 1.0350 has possibly made a temporary top at yesterday's fresh 1-month peak at 1.0786 and further weakness to 1.0727/31 would be seen, below would head towards 1.0698, 1.0663 later. On the upside, only a daily close above 1.0786 would indicate aforesaid pullback over and risk one more rise towards 1.0807. Data to be released on Tuesday : New Zealand building permits, NBNA business outlook, NBNA own activity, Japan unemployment rate , industrial production, retail sales, consumer confidence, construction orders, Australia building permits, business inventories, current account, net exports contribution, China NBS manufacturing PMI, NBS non-manufacturing PMI. U.K. nationwide house price, Swiss exports, imports, trade balance, retail sales, GDP, France consumer spending, GDP, CPI, producer prices, Germany unemployment rate, unemployment change, Italy GDP, CPI, EU HICP, Canada GDP. U.S. monthly home price, Chicago PMI, consumer confidence and Dallas Fed manufacturing business index.

Easing in China may lead to new covid infections and subsequent lockdowns.  The US housing market is weakening, potentially leading to lower long-term rates.  Stocks staged a fierce correction and may be ready to fall. USD/JPY bearish – the broader trend is to the downside, and the most recent rise may prove to be a selling opportunity. Why? *Note: This content first appeared as an answer to a Premium user. Sign up and get unfettered access to our analysts and exclusive content. 1) China has eased restrictions for residents in Beijing and factories in Shanghai, but that has come after covid cases dropped. For policymakers, recent developments only serve as a vindication for their zero covid policy. There would be fresh lockdowns when new cases appear – and with Omicron and its subvariants, contagion is high.  The yen tends to benefit in response to adverse news in China. Investors repatriate funds to Japan, undoing lending in cheap yen. That could happen again in response to the next flare up.  2) US housing weakness: Jumping to the other side of the Pacific, the US economy has recently shown signs of weakness, especially in the housing sector. Both pending and new home sales fell well below expectations in April, exposing softness. Have mortgage rates gone too far? That would imply a drop in long-term yields is coming, and that weighs on USD/JPY. Returns on 10-year Treasuries and the currency pair are well correlated.  3) Correction may end: Another factor in favor of further drops for USD/JPY is a resumption of the falls in US stock markets. American shares have staged a massive comeback, breaking a long losing streak. However, they could resume their decline without any fresh optimistic news. The "buy the dip" move may make way for a "sell the rally" response.  USD/JPY Technical Analysis Technically, USD/JPY is struggling to recapture the 4h-50 Simple Moving Average (SMA) while the 100-SMA is breaking below the 200-SMA, another bearish sign.  Support is at 126.90, which was a low point in recent days, and then 126.35, the monthly low in May. Even lower, noteworthy support is only at 125. Resistance is at 127.60, which capped the pair in recent days and also served as support beforehand. 

Key highlights EUR/USD gained pace and surpassed the 1.0700 resistance. A major bullish trend line is forming with support near 1.0665 on the 4-hours chart. EUR/USD technical analysis Looking at the 4-hours chart, the pair gained pace above the 1.0700 level, the 100 simple moving average (red, 4-hours), and the 200 simple moving average (green, 4-hours). The bulls even pushed the pair above the 1.0750 resistance. On the upside, the bears might remain active near the 1.0800 level. A clear move above the 1.0800 level might push the pair further higher. The next major barrier could be 1.0920, above which EUR/USD could rally towards the 1.1000 level. If not, the pair might correct lower below 1.0720. On the downside, there is a major bullish trend line forming with support near 1.0665 on the same chart. A downside break below the trend line could send the pair towards the 1.0620 support. The next key support is near 1.0500.

The rally is back on after a strong week for equity markets. The main indices avoid an eighth straight down week. US market still has had one of its worst starts to the year in history. The week began with peak fear and ended with optimism high. Surely it can't be that easy to turn things around. But investor sentiment appears markedly improved after a week of promising earnings from the retail sector, coupled with some strong consumption data to end the week on Friday. Interest rate markets also took a noted doveish turn and now have taken down estimates for year-end interest rates by a full 25 bps. One week ago Fed funds futures were pricing in a 2.75-3% year-end rate. Now they are looking at 2.5-2.75% as the rate by December.  Source: CMEGroup.com That curious move enabled equities to breathe a little easier. The dovishness was perhaps added to on Friday with the Fed's favorite measure of inflation, the PCE, coming in as expected and showing a decline versus a month earlier. This welcome decline was seized upon by equity markets which pushed aggressively higher throughout the day. However we must urge caution, inflation is spreading its wings out into the full realm of the economy. This reduction was due to some high prior numbers dropping out of the calculation, such as used car prices. We are not so doveish based on one reading. We also think the Fed is unlikely to reverse course suddenly as Powell in his last missive promised pain for the equity market. The University of Michigan Sentiment Index has never been this low without a US recession. So consumers are depressed but spending money saved during covid lockdowns. That should give a short-term spending boost and we are already seeing strong booking from travel companies and airlines. But that may prove short-lived whereas inflation will likely outlast the spending splurge. In any event, the spending splurge won't exactly help inflation lower.  So let us get to the numbers for the week. The S&P 500 posted an impressive 5.8% gain for the week but the Nasdaq took the garlands with a comeback gain of 5.98%. The Dow was up 5.4%. All sectors were positive on the week with Financials (XLF) and Tech (XLK) the strong performers while Communications (XLC) was the laggard. Meme stocks made some noted gains with GameStop rising 43% on the week on talk of a short squeeze. Here we go again, but I don't think so. GameStop has earnings next week. A retail rally helped improve investor sentiment more broadly after Target and Walmart raised serious concerns last week over the economy and consumer spending. This week saw massive relief rallies from Dollar General, Dollar Tree, and Macy's while Costco limped behind. We had outlined such a likely rally after the bad news was fully priced in post Target and Walmart. Tesla and Twitter also made gains after Elon Musk is to increase his personal financing to $33.5 billion for the proposed Twitter deal. The saga could run and run however as the SEC is on the case over Elon's late filing. Regardless Tesla rallied strongly to close 7% higher at $733. During the week we published our deep dive on Tesla with a $400 price target. We included a DCF and relative valuation comparison, take a look here. Friday's rally needs to be put in the context of a number of positive factors. Firstly seven straight weeks of decline have only happened three times before in history, 1970, 1980 and 2001. So odds were in favor of a rally. Secondly, fund managers and hedge funds were very underweight equities. Thirdly it's a long weekend so squaring up is always common and fourthly sentiment indicators were terrible so a counter-trend rally was likely. So forgive us for not getting too excited just yet.  S&P 500 (SPY) technical outlook That brings us neatly to our technical overview. The SPY has rallied nicely up to our first resistance at $415. This really needs to break if this move is to be maintained. If not then expect new lows soon. But let us assume this rally is gaining strength, then a stretch to $435 is the real target. This could be choppy and a break up to $440 or even $445 would really confound the bears and stretch early bearish selling. Remember a lot of people were positioned or waiting for this rally. Many are looking to sell the rally and most of those sell orders will be at $435. The market is set up to stop many of them out by overstretching the rally to $445.  S&P 500 (SPY) chart, daily Earnings week ahead GameStop is the highlight for retail, meme traders. Not much else to get too excited about, earnings season is...

Summary So far in 2022, inflation has outpaced income, yet real consumer spending has increased every month this year including another 0.7% in April as we learned in today's personal income and spending report. The source of funds for these outlays are not infinite. For real spending to be sustained, we'll need to see income outpace inflation. That happened in April for the first time since October 2021. Consumers getting close to the end of the lollipop? On the day after revised GDP numbers showed an even faster pace of consumer spending in the first quarter, fresh data today for April showed that momentum continued into the second quarter. Personal spending shot up 0.9% in the month and, after adjusting for inflation, real spending still added 0.7%; that comes on the heels of revisions that more than doubled March's real spending gain from 0.2% to 0.5%. Spending was relatively broad-based with real services outlays growing another 0.5% and real goods spending up 1.0%. Goods spending got a lift from motor vehicles, the category with the largest increase on a real basis. Other durables categories, where frankly we have been expecting some weakness like recreational goods and vehicles and durable household equipment, also saw increased spending in April. Perhaps to some extent we are seeing the delayed arrival of stoves, dishwashers and other household durable goods items that have been in short supply these past few years. We have a tendency to discount survey data at least when it comes to the consumer. Sentiment has turned sharply lower in recent months with most consumers blaming inflation for their misery. It is hard to square that with recreational services posting the largest gain of any service category in real terms (+1.5%). Bars and restaurants also posted a solid 1.3% gain while grocery store spending was one of only two categories to post a decline in real spending during in April. The other was gas stations, which signals that consumers may be at least trying to combine trips to make fewer trips to the pump. Download The Full Economic Indicator

Europe It’s been a decent week of gains for markets in Europe, with the FTSE100 enjoying a particularly strong performance, on course for its best week in over two months. This outperformance has been helped by decent gains from the likes of Ocado, Kingfisher, B&M European Retail and Primark owner Associated British Foods, after yesterday’s fiscal stimulus package, took the pressure off UK consumer incomes with over £650 of help for the most vulnerable households, along with a £400 one-off payment to every homeowner. Having had a bit more time to dissect yesterday’s windfall tax announcement from the UK government we’ve seen further weakness in the UK oil and gas sector. While BP and Shell shares have held up quite well, they are still down today, after BP said it would review all of its investment in the UK and North Sea, which could well lead Shell to do the same thing. Earlier this year Shell submitted a new plan for its Jackdaw gas project with a delivery date in late 2025, after it was rejected last year. Could yesterday’s events prompt a reappraisal of that, even if it gets approved?    The smaller UK oil and gas companies have been hit the hardest given they earn all of their revenue in the UK, and their shares are down hard, not only today, but this week as well. Harbour Energy, which was formed out of the wreckage of Premier Oil and Chrysaor in April last year, and whose shareholders have had a torrid time over the past 5 years, is the worst performer on the FTSE100, but we’ve also seen EnQuest and Serica Energy slide back as well, given that the majority, if not all of their revenue, comes from the North Sea We’re also seeing weakness in the UK grid and power suppliers over concerns they could be next in line for some form of levy, with SSE, Centrica and National Grid all falling back for the second day in a row, and down on the week.   US US markets have opened higher today as they look to complete their first positive week since early April, in a welcome respite for battered dip buyers. The latest US PCE inflation data which the Federal Reserve uses to measure underlying inflation saw a decline in April, from 5.2% to 4.9%. Also, encouragingly the latest US personal spending data showed that US consumers were still inclined to spend money with a rise of 0.9%, which was slightly higher than markets had been expecting. With US consumers still looking fairly resilient we can safely conclude despite some of the earnings misses being seen by US retailers that money is still being spent, however it appears to be being spent in different parts of US retail as consumers become more cost conscious. We’ve seen downside surprises in the likes of Walmart and Target, yet Dollar Tree and Dollar General have surprised to the upside. Staying on the retail theme, GAP shares have plunged after reporting a bigger than expected loss in Q1. The retailer who owns the Old Navy and Banana Republic brands also downgraded their full year outlook for profits from $1.95c a share to between $0.40c and $0.70c a share. Its Old Navy It was a similar story for American Eagle Outfitters which have also slid sharply after its quarterly and revenue numbers came in light. It’s been a classic case of withdrawal symptoms for cannabis company Canopy Growth after it missed on revenues, as well as posting a bigger than expected loss in its Q4 numbers. Revenue came in at C$111.8m well below expectations of C$131.6m while losses narrowed from last year, but not by as much as the market had hoped, coming in at -C$121.8m. FX The US dollar looks set for its second successive weekly decline in line with weaker US treasury yields, which appear to be driving this recent weakness. The recent weakness appears to be being attributed to markets pricing out some of the more aggressive rate hiking scenarios. While that may be true, and there’s little evidence of that, it appears more likely that the greenback is losing ground as traders’ price the prospect of more aggressive tightening from the likes of the European Central Bank, the Bank of England and other central banks. There’s also the old favourite of good old fashion profit taking. This week’s windfall tax inspired fiscal stimulus has also given the pound a boost as markets price in more rate hikes from the Bank of England in the coming months. Commodities Brent crude and US oil prices hit their highest levels in two months today, as lower inventories spark a rush for new capacity, with the Biden administration looking to try and persuade its domestic oil industry to reopen closed...

The Canadian dollar hasn’t made any spectacular daily gains since May 13th, when it shot up 1.1%. The currency has, however, made slow but steady progress against its US cousin. Earlier today, USD/CAD touched a low of 1.2731, its lowest level in three weeks. Canada Retail Sales jump in Q1 Canada’s retail sales for March helped the Canadian dollar rally on Thursday. The headline figure was virtually unchanged, but core retail sales rose 1.5%. According to StatsCan, retail sales jumped 3.0% in Q1, its highest level since Q3 2020. Consumers continue to spend despite red-hot inflation, but if consumers decide to tighten the purse strings, the economy would likely take a hit and drag the Canadian dollar lower. The US dollar finds itself under pressure as risk appetite has rebounded. Investors were pleased with the FOMC minutes, as the Fed signalled that it planned to press ahead with 50-bps rate increases in June and July, which soothed concerns about a possible massive 75-bps hike. This gave the equity markets a boost and sent the greenback lower. The US economy may not be in a recession, but negative growth in the first quarter is certainly a concern. Second-estimate GDP came in at -1.5% QoQ, shy of the estimate of -1.3% and revised downwards from the initial estimate of -1.4%. Growth in Q1 was hampered by a surge in Omicron as well as the Ukraine war. One bright spot was solid consumer spending, which remains strong in the face of spiralling inflation. Consumer spending, as gauged by PCE expenditures, rose 3.1% in Q1, up from 2.7% prior. The markets are keeping a close eye on Personal Spending and Personal Income, which will be released later today. The economy is expected to rebound in Q2, but could be much lower than the rosy GDP numbers we saw after the US economy reopened. USD/CAD technical There is resistance at 1.2866 and 1.2955. USD/CAD is testing support at 1.2750. Below, there is support at 1.2661.