Investors are worried about the economy and how it may be impacted by inflation. The Federal Reserve has been struggling with keeping a lid on rising prices, but Goldman Sachs’s Chief Economist Jan Hatzius believes there is an 15% chance that we could see recession within two years as well as one in ten chances over this next year alone!
Hatzius in a note said: “The main challenge for the Fed will be to reduce the jobs-workers gap and slow wage growth to a pace consistent with its inflation goal by tightening financial conditions enough to reduce job openings without sharply raising unemployment”, adding that the history suggestes that this may be challenging to do.
Treasury yields rose to a almost two-year high in response to surging inflation, with the 10 year TMUBMUSD10Y rate climbing higher than ever before this year. Yields move opposite each other and debt prices go up when interest rates fall lower; this means that investors are more likely sell off their assets because they see opportunities elsewhere (or maybe just get out).
Elsewhere in currency market, the Australian dollar was the worst performer among major currencies, with AUD/USD falling to one-month lows beneath 0.7350 amid more confusion and pessimism about China’s lockdown situation.
The yen hit its highest levels since 2002 near 127.00 USD/JPY – a sign that some kind of intervention may be coming soon to reverse recent weakness, after all!
The loonie is one of the best performing currencies in this year’s G10 rankings, thanks to higher oil prices and with Canadian Consumer Price Inflation data later this week expected. USD/CAD remained just above 1.2600 near its 200 day moving average.
The EUR/USD continued its downward trend, dropping about 0.25% to back under 1.0800 and is now focusing its attention on last week’s lows around 1070s zone again after testing it for most part of this month so far.
The GBP/USD is currently trading just above the bands of support and resistance, which has resulted in an annual low for this year. The NZD also dipped below a key level it has been relying on-the March Low at 0.6728.
Gold is on the rise, and bitcoin isn’t far behind. The precious metal has increased by 0.4% to $1,982.80 per ounce while cryptocurrency goes up another 0.55%.
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