Dollar Pushes to New Highs, Stocks Collapse Again

Interestingly, USDJPY was down 100 pips as US yields fell. The dollar index jumped above 104.30 for the first time since December 2002.

At the same time, the negative sentiment in global stock markets persists, leading to continuous declines in equity indices. As a result, all major US indices declined to new cycle lows yesterday and today. 
 

Inflation in spotlight

The latest inflation figures from the United States will be digested by European markets on Thursday, with the headline consumer prices rising 8.3% yearly in April. While down from the 8.5% rate from a month ago, it was higher than market expectations of 8.1%.

Similarly, the core inflation slowed from 6.5% to 6.2% year-on-year, higher than 6% expected. 

The results raised doubts about whether the inflation cycle had reversed, as it remained near to last month's 40-year peak, reigniting concerns about the economic harm caused by the strong interest rate rises required to manage it.

Later today, the US PPI inflation indices are due, expected to moderate slightly in April. However, given yesterday's results, a similar scenario might repeat today - likely causing another sell-off in risk assets.

“Inflation appears to be entrenched within many areas of the economy and regardless if we have witnessed inflation peak, a persistently slow grind lower will be more problematic for the Fed to simultaneously cool inflation without tipping the economy into recession,” Charlie Ripley, a senior investment strategist at Allianz Investment Management, said in an emailed note Wednesday.

On Wednesday, the WTI oil jumped over 5% as Russia put sanctions on several European gas firms in response to the sanctions placed on Moscow for its February attack on Ukraine.