Notifications Bell

USD hits 20-year peak versus Japanese Yen

USD hits 20-year peak versus Japanese Yen

Buyers prevailed yesterday, taking advantage of stock markets' lowest levels in six weeks

US Q1 Earnings

The US companies’ quarterly results that are being released continue to beat analysts’ forecasts in general terms. Yesterday, Microsoft and Visa raised investors’ spirits, even though they had been affected by the tensions caused by the Russian-Ukraine war. Serious threats about a potential nuclear conflict and cuts in Russian gas supplies to Poland and Bulgaria added fuel to an already scorching fire.

On the other hand, two other great business titans, Apple and Amazon, will publish today their quarterly figures.

However, the concern about a deep slowdown of the global economy remains. Much of the commentary from professional investors leans toward a gloomy future scenario because of the conflict in Ukraine, high price levels affecting costs of production, and the most restrictive monetary policies. Usually, when the investors’ consensus favors a drop in the stock prices, the opposite happens.

Inflation is king

The key will be in the inflation figures released in the coming months since they will be the ones that direct the central banks' decisions on interest rates. Tomorrow, the Fed's favorite inflation indicator will be published – PCE (Personal Consumption Expenditures) - in which any sign of decline or stagnation will be valued positively by the stock markets. Interest rates have stopped their upward path, with the US 10-year bond yield sitting at 2.79%, below recent highs.

USD smashes JPY and EUR

The US Dollar has not rested on its dazzling upward path throughout this process, either because it has acted as a safe-haven currency or because of the interest rate rise. It began with the Japanese Yen price, which reached levels not seen in 20 years, concerning the Japanese authorities. It continued the same general trend against the Euro.

In this case, the European currency has been affected by the ECB’s inability to raise interest rates simultaneously with the Fed, and the conflict in Ukraine. The EUR/USD pair has fallen to levels not seen since 2017, near a major support zone around 1.0480-1.0500. There are already those who predict that it will fall to parity with the US Dollar. Still, if the pressure continues and before it reaches that level, the ECB might begin to express concerns about this movement. Also, as this scenario might develop, the threats of ECB intervention in the market might become even more influential on Euro equities.

Gráfico, Gráfico de líneasDescripción generada automáticamente

Sources: Bloomberg.com, reuters.com

This information/research prepared by Miguel A. Rodriguez does not take into account the specific investment objectives, financial situation or particular needs of any particular person. The research analyst primarily responsible for the content of this research report, in part or in whole, certifies that the views about the companies and their securities expressed in this report accurately reflect his/her personal views and consequently any person acting on it does so entirely at their own risk.

The research provided does not constitute the views of KW Investments Ltd nor is it an invitation to invest with KW Investments Ltd. The research analyst also certifies that no part of his/her compensation was, is, or will be, directly, or indirectly, related to specific recommendations or views expressed in this report.

The research analyst is not employed by KW Investments Ltd. You are encouraged to seek advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit that conforms to your specific investment objectives, financial situation or particular financial needs before making a commitment to invest.

The laws of the Republic of Seychelles shall govern any claim relating to or arising from the contents of the information/ research provided.