Fed rate hike still expected.

The German ZEW economic expectations index retreated to 4.1 for April from 13.0 the previous month and below consensus forecasts of a further net recovery to 15.3. The current conditions component, however, did recover to -32.5 from -46.5 and above market expectations of -40.0. The dip in expectations will maintain some Euro-Zone inflation meets expectations

The headline Euro-Zone CPI inflation rate edged higher to 7.0% for April from 6.9% previously and in line with consensus forecasts. The core rate edged lower to 5.6% from 5.7% and also in line with market expectations.

The US JOLTS data recorded a decline in job openings to 9.59mn at the end of March from a revised 9.97mn previously and below consensus forecasts of 9.75mn. The weaker than expected data for a second successive month triggered fresh fears over the economic outlook.

The US JOLTS data helped triggered a fresh slide in risk appetite as markets fretted over the recession risks. Equites posted sharp losses with fresh losses in the banking sector and Treasuries posted strong gains. Markets also fretted over the US debt-ceiling issue.

The yen regained some ground as risk appetite deteriorated and US yields moved lower.

The dollar overall was mixed with some recovery against European and commodity currencies but retreated from intra-day highs.

The Federal Reserve will announce its latest interest rate decision on Wednesday. Consensus forecasts are for a further 25 basis-point rate hike to 5.25%. Markets are pricing in just over an 85% chance of a hike. The policy statement and forward guidance from Chair Powell in his press conference will be crucial for all asset classes.

The ADP jobs report and ISM services-sector data will also be important for confidence in the US outlook, especially if the releases are a long way from expectations. Market expectations are for an increase in US private payrolls of 150,000 and an ISM services reading of 51.8.

The Euro was unable to make any headway on Tuesday with little impact from the inflation data. The slide in risk appetite undermined the single currency and also underpinned the dollar on defensive grounds. EUR/USD dipped below 1.0950 before recovering to near 1.1000 as US yields declined. EUR/USD traded around 1.1025 on Wednesday.

Lower US yields and weaker equities triggered a yen recovery. USD/JPY dipped sharply to lows just below 136.00 before trading just above this level.

The Swiss franc was resilient amid weaker equities. EUR/CHF retreated to 0.9830 with USD/CHF blocked at 0.9000 and retreating to 0.8915.

Sterling was hampered by weaker global risk appetite. GBP/USD dipped below 1.2450 before recovering to near 1.2500 and trading just below 1.2500 on Wednesday.

Commodity currencies retreated as risk appetite deteriorated. AUD/USD was unable to hold 0.6700 and retreated to 0.6665 USD/CAD strengthened to highs near 1.3640 as oil prices also declined sharply before a retreat to 1.3615.

Economic Calendar