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Federal Reserve Governor Lisa Cook will speak on the economic outlook in ten minutes.Goldman Sachs: Equity long/short hedge funds fell 1.7% in Thursdays sell-off.On April 4, Ashish Shash, chief investment officer of public investments at Goldman Sachs Asset Management, said that the "growth shock" currently facing the United States means that the Federal Reserve "will enter a certain degree of rate cut mode this year, beyond the expectations of six weeks ago or two months ago." Shash said: "What we see in the bond market is reasonable pricing for the Fed to open the window, or the market indicates that the Fed may actually have to ease policy further." He added that recent economic data confirms this view, but "the additional tariff levels we have seen in the past 24 hours... have further increased this expectation." Market pricing on Thursday showed that investors expect three to four rate cuts in 2025, up from about three the day before.Market news: Ukrainian President Zelensky said he ordered the Defense Minister and others to obtain official information about military aid from the United States.According to CNBC on April 4, Brad Gerstner, CEO of Altimeter Capital, said on Thursday that he would walk out of the "air-raid shelter" with Nvidia (NVDA.O) and into a safe position, expecting that the chipmaker will be able to withstand Trumps extensive tariffs. "GPU growth and demand have broken records," he said, referring to Nvidias graphics processing units that are driving the artificial intelligence boom. He said that investors only need to listen to the comments of OpenAI, Google and Musk. An important reason why Nvidia may be better able to withstand Trumps increased tariffs is that semiconductors are on the exception list, which Gerstner called a "wise exception" because of the importance of artificial intelligence. Gerstner is worried that tariffs may lead to a recession, but he is relatively optimistic about Nvidia and said that "the negative impact of tariffs will be much smaller than in other areas."

Dow Jones, EUR/USD, USD/JPY, AUD/USD, GBP/USD, EU CPI, BOJ, and US GDP for the Week Ahead

Drake Hampton

Apr 25, 2022 10:49

For the fourth consecutive week, the Dow Jones Industrial Average (DJIA) fell nearly 2% as risk sentiment deteriorated rapidly into the weekend. The catalyst appeared to be a discernible increase in the Fed's rhetoric about significantly tightening policy in response to soaring inflation that threatens to undermine the economic recovery. Rate traders responded by increasing their bets on 50 basis point rate hikes via overnight index swaps, which currently price in complete 50 basis point raises for the next three FOMC meetings. The preliminary gross domestic product (GDP) growth rate for the United States is scheduled to be released on Tuesday, which will indicate how much the economy increased in March.

 

This resulted in a rebound rout in Treasuries, which spread to the rest of the world's financial markets. Government bond yields increased across the board, from UK Gilts to German Bunds. The French election this weekend may result in some European bond repricing, but the impact is likely to be minor in the event of a Macron victory. A Le Pen triumph, on the other hand, would almost certainly have a rattling effect, although polls indicate that is an improbable prospect. Eurozone inflation data for the first quarter may spark some volatility trading in EUR/USD. According to a Bloomberg survey, economists anticipate Q1 core inflation to be 3.1 percent year on year.

 

The risk-sensitive Australian and New Zealand Dollars fell against the Greenback in the Asia-Pacific region. Australia is expected to release its first-quarter inflation figures, with analysts anticipating an increase to 4.6 percent from 3.6 percent year over year. A stronger-than-expected reading could spark a recovery in the battered AUD/USD pair. A broad decline in metal prices weighed on sentiment around the Australian Dollar, which remains under pressure due to continued Chinese lockdowns.

 

USD/JPY could witness a turnaround following Thursday's Bank of Japan policy meeting outcome. The central bank has been assertive in recent months in attempting to contain bond yields, and no adjustment in the benchmark rate is expected this week. However, a change to the central bank's inflation targets may result in some currency repricing. Last week, options traders began to unwind bearish bets on the Yen, as demonstrated by a decline in one-week risk reversals. Another significant focus is the Bank of England's rate hike bets, following a bad batch of statistics that put doubt on the United Kingdom's economic recovery, with retail sales and PMIs falling short of expectations.

Weekly Performance of the US Dollar Against Currencies and Gold

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