What you should know on Friday, May 13:
The US dollar soared thanks to risk aversion. Panic selling hit stocks and crypto hardest as speculative interest priced in the massive quantitative tightening. More and more central bankers are hinting at established measures to drain liquidity.
European Central Bank officials continue to pave the way for a rate hike in July, while Bank of Canada Deputy Governor Toni Gravelle suggested the central bank would need to raise rates above neutral. Finally, Bank of England Governor Ramsden noted that inflation may not fall as fast as forecast, highlighting the need for more rate hikes.
It is worth noting that the US Federal Reserve is two steps ahead of other central banks, raising rates by 50bps in May and promising at least 2-3 more hikes of 50bps as it draws up plans to reduce its balance sheet. .
In addition to ruling concerns, tensions are rising between Russia and the Western world. Russian Vice President Dmitry Medvedev has warned that military assistance to Ukraine risks creating a conflict between Russia and NATO. Meanwhile, Ukraine has announced that it would suspend the transit of Gazprom gas on its territory. European Commission President Ursula von der Leyen said Russia was the “most direct threat” to the international order.
In addition, Russia has threatened retaliation if Finland joins NATO. Earlier, Finland’s president and prime minister said the country should apply for NATO membership “without delay.”
EUR/USD fell to 1.353, now trading around 1.0370. The GBP/USD pair fell below 1.2200. The USD/CHF pair reached parity for the first time since December 2019, now trading around 1.0040, while the USD/JPY fell sharply, stabilizing around 128.40.
Commodity-linked currencies fell against the dollar. AUD/USD is now at 0.6850, while USD/CAD is trading at the 1.3040 price zone.
Spot gold hit a new monthly low, now trading around $1,824 a troy ounce, while crude oil prices continued to recover, with WTI trading at $106.85 a barrel.
Global indices closed lower, although Wall Street managed to trim most of its intraday losses before the close.
US Treasury yields fell amid renewed demand for security.
Source: Fx Street
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