1 Minute Market Rundown – 3rd May 2022
Equities Hold In
Crypto Consolidates
April ended as much of the year has been with risk firmly on the backfoot. It has been the worst start for the S&P since at least 1993. Crypto didn’t have the best month either with both BTC and ETH down over 16% for the month. The driving force has been a war on Europe’s door as well as surging inflation and the reaction by central banks. It is quite fitting that this month kicks off with the FED and nonfarm payrolls on the calendar.
Powell and Co announce tomorrow and it is widely accepted they will announce a 50bps hike. With 10 year yields now above 3% it is safe to assume that the market expects them to reaffirm their hawkish stance and infact assume they have more room to be hawkish – which is starting to blow our mind. We must be close to peak hawkishness and inflation peaking but you need to have some deep pockets and a strong conviction to put those trades on. We believe non inflationary data is going to be in much more focus now. Risks to global growth will now be playing on people’s minds and a continued hawkish stance from the FED will see risk remain under significant pressure.
Yesterday saw a mini flash crash in Swedish stocks following an error by a trader at CITI, stocks have since recovered overnight as officials in China rolled back covid related curbs.
Crypto markets continue to trade sideways but yet again the path of least resistance to us looks to the downside. The alts have suffered over the past week with MATIC, DOT and AVAX some of the coins that are down approximately 15%. We have been saying for a while now there is a significant lack of crypto news coming out to buoy these markets. In such an absence, crypto will take its cue from equities and other risk assets – safe to say they have struggled. BTC and ETH currently have support coming in at $37000 and $2700. With a big week ahead with FED and non farm payrolls – I will be shocked if we don’t have a move in either direction. With non farm payrolls it’s usually a case of, ‘big number, risk rallies.’ However it is not that simple this week. A strong payroll print may embolden Powell to remain hawkish and even get more hawkish which will see risk and crypto come under pressure.
The recession argument is a maybe but high inflation and a hawkish fed is a fact. Tough for us to be anything but bullish USD at the moment. Saying that we felt last week was a nice rally into which we squared up our long USD positions. With the BoE also announcing this week, selling rallies in EUR/USD is our preferred play.
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