Dollar Dominates Again; Stocks Erase Losses

In the FX market, for the first time since January 2017, the DXY rose over the 103.00 level. At the same time, the EURUSD pair fell to fresh cycle lows below 1.05, GBPUSD declined to 1.25, and the USDJPY pair advanced above 130, printing new 30-year highs.

The USD bulls were unmoved by data showing that the US Goods and Services Trade Deficit set a new high of more than 125 billion USD in March, prompting some experts to lower their Q1 GDP growth forecasts.

Rising energy costs

Concerns about energy price shortages fueling stagflation in the Eurozone remain high as the EU debates a new round of energy sanctions that may hit oil and gas exports. The unfavorable macroeconomic/geopolitical backdrop, according to several experts, explains why EURUSD has failed to profit from the ECB's hawkish move toward lift-off in Q3 in recent weeks.

“Energy is being increasingly weaponized as the war in Ukraine looks set to enter the long haul, and expectations grow that a crude oil embargo will be slapped on Russia by the European Union,” said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.

China lockdowns causing worries

Anxiety that a protracted Covid epidemic in China, the world's second-largest economy, may affect domestic and global growth has weighed heavily on European and US stock markets this month.

The medium-term outlook remains bearish since all the major US indices trade below their respective 200-day moving averages. However, yesterday and today saw some solid buying, likely setting up a short-term bottom.

Later today, the usual Thursday's jobless claims are due, expected to improve slightly. Moreover, the US preliminary GDP for the first quarter will be released, and investors expect a massive drop to just a 1.1% annualized, down from 6.9% in the previous quarter. As a result, stagflation fears will undoubtedly be strengthened.