Breaking News
Investing Pro 0
NEW! Get Actionable Insights with InvestingPro+ Try 7 Days Free

A Wobbly Rebound

By Swissquote Ltd (Ipek Ozkardeskaya)Market OverviewMay 18, 2022 13:08
A Wobbly Rebound
By Swissquote Ltd (Ipek Ozkardeskaya)   |  May 18, 2022 13:08
Saved. See Saved Items.
This article has already been saved in your Saved Items

The US equity markets rallied yesterday after taking over a positive session from the Europeans. However, the US retail sales data didn’t necessarily hint at slowing spending, and Jerome Powell didn’t say things that investors would normally like to hear. 

Resilient spending is no good news for the Fed’s inflation battle 

US retail sales grew more than 8% on yearly basis in April, more than around 7.30% printed a month earlier, meaning that Americans continue spending despite tighter economic conditions.  

Unfortunately, the resilience of spending means that the Federal Reserve’s (Fed) actions don’t result in desired cooling effect on inflation.  

Inflation mostly comes from the supply side, especially from the soaring energy and food prices as a result of pandemic-hit supply chains and the war in Ukraine. Whereas, the monetary tools are intended to control the demand side - and bring inflation by cooling down demand. If demand doesn’t ease fast enough, the Fed must tighten faster.  

So, it’s no surprise Jerome Powell said that the Fed is resolved to curb inflation even if it means pushing the rates into restrictive territory. If that ‘involves moving past broadly understood levels of neutral we won’t hesitate to do that’, he said.  

Powell’s words didn’t hit the investor appetite immediately. Nasdaq rallied more than 2.50% yesterday, as the S&P500 rebounded 2%. But mixed activity in US futures hint that appetite may not remain as strong in the coming sessions. 

In the FX 

The US dollar eased from two-decade highs. Prospects of higher US rates, and the positive divergence between the Fed and other central banks should prevent the dollar from falling significantly, as other central banks are also tightening their purse strings, but they sound timider when it comes to the timing and the intended sizes of the eventual moves. 

The EUR/USD rebounded past the 1.05 level yesterday on the back of a broad-based softening in the US dollar. But the US 10-Year yield remains steady around the 3% mark, and poised to move higher, parallel to the expectations of solid rate hikes in the US in the coming months.  

Eurozone’s final inflation data is due today, and should confirm a rise to 7.5% in April, an eye-watering number which should keep the European Central Bank (ECB) hawks and the euro bulls alert, and help the single currency consolidate its latest gains against the US dollar.  

Gold trades around the $1800 mark. On one hand, the positive pressure on the US yields weighs on appetite for the non-interest-bearing gold. On the other hand, the high volatility and the looming uncertainties support safe-haven inflows toward the safe-haven metal. Yet, the long-term risks remain tilted to the downside. The yellow metal is below its 200-DMA - which now acts as resistance to any positive attempt, and is preparing to test the long-term triangle base - if broken should confirm a further negative outlook. 

Crude oil spiked above the $115 per barrel, but bumped into top sellers above this level. Solid support approaching the $120 mark will likely be hard to clear, as the rising energy prices have a curbing effect on demand at the actual levels, and automatically cool down the rally.  

A Wobbly Rebound

Related Articles

Ipek Ozkardeskaya
Optimism Didn’t Last Long By Ipek Ozkardeskaya - Jun 28, 2022

Optimism didn’t last long yesterday, and the market mood turned rapidly sour, as the news flow was not pointing at sustained gains anyway! Oil and commodity prices rebounded with...

A Wobbly Rebound

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (1)
som sithy
som sithy May 18, 2022 13:49
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Our Apps
© 2007-2022 Fusion Media Limited. All Rights Reserved.
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
  • Sign up for FREE and get:
  • Real-Time Alerts
  • Advanced Portfolio Features
  • Personalized Charts
  • Fully-Synced App
Continue with Google
Sign up with Email