The weakest start to a New Year since 2009 for the US Treasury market continues to undermine stocks and support the USD as Yields continue higher.
The Market Week – January Week 3
The markets are now focused on Inflation and the central banks. Treasuries continue to have a torrid start to 2022 and the movement in Yields is the main driver of market sentiment. Stock markets have been rocked by the expected rise in interest rates and a disappointing start to Q4 Earnings Season. CPI rates have hit 30-year highs.
Jobs growth also shares the headlines; good numbers from Australia and the UK this week continue to show a tight jobs market, but with high inflation rates those in work continue to be squeezed. In the US the weekly claims rose over 30k to 230k, the largest rise since October 7.
The vaccine and booster rollout programmes for Omicron continue to support sentiment. The variant’s transmissibility is still testing global health systems, but the severity of it also appears less than previous variants and many countries are reporting a fall in cases.
In FX the USDIndex holds its bid supported by the rise in Yields, rising from a 45-day low at 94.55 to 95.80 this week, while EURUSD fell from 1.1480 to test the 1.1300 handle. USDJPY moved up from the 113.50 zone to test and reject 115.00 and Cable finally stalled at 1.3750 and the 200-day moving average to test down to 1.3570.
US stock markets had another weak week, undermined by a disappointing start to the Q4 Earnings Season. The USA500 spiked down to 4,530, the USA30 tested to 35,125 and the USA100 was once again the weakest, testing down to the 15,000 zone.
The Gold price continues to gyrate range bound without any clear direction, as the worries over inflation have not seen the rally in Gold normally expected and its allure as an inflation hedge seems to be waning. $1830 remains key resistance and $1800 key support.
USOil prices continue to be supported by very tight supply, low inventories, and this week the conflict in Saudi Arabia and Yemen. The key psychological $85.00 a barrel has been breached this week and touched as high as $87.00 ahead of today’s EIA inventories.
The yields remain the key driver of the market once again this week, with the US 10-Year Treasury Note breaching as high as 1.90%, significantly above the pivot 1.75% level as Treasuries continue to have their worst start to a new year since 2009.
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Andria Pichidi
Market Analyst
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