Markets Report - 30 May 2022

A daily breakdown of the markets for the 30th May 2022, provided to you by Sterlex.

🌍📈📉Risk sentiment remains finely balanced on the edge of EU meetings on Russia Oil Embargos, Support to Ukraine, Kyiv, energy sanctions on Russia, & the fluctuating money markets & Bond bets Fed rate hike pace looming. Inflation & energy prices remain forefront of weak sentiment also.

Although Equity risk has recovered some losses this past week, particularly in the US, we still don't see clear conviction or positive recovery lasting long and sustaining. Hearing surveys & traders views lean more toward lower for longer on Bonds, Equities, & risk ccys, so we are wary of buying any premature dips too hastily. Cash levels are at their highest for several years at many large asset managers so we prefer not to buck this trend by over risking in this environment.

The $ still well supported above 102 & 99/98.40s (Which we quoted last week) - even if there are some pullbacks, the greenback still has plenty reason to Bid on higher.

Focus remains on the EU meetings, German Inflation, EU inflation, AUS GDP, Jap Retail, US ISM, US CB, US NFP Payrolls. Amongst headline risk across EU - US Energy plans against Russia.

🌎📉📈Still looking at US 10Yr Yields tagging 2.95/3% again, Vix still buoyed above 25 handle which continues to be the current norm. Options pricing maybe increasingly interesting ahead of short week in UK later. Precious metals, Silver sub 20 still appealing for longs, Gold prefer to let run. Still no stability in our view. Highly uncertain.

🇬🇧💷 Cable Buoyed by all the above factor broadly.

Although our preferred £ Crosses are showing pullback areas we targeted (GBPNZD 1.91 - 1.89, GBPAUD 1.7514, 1.7452), we are still mindful of further downside risk due to increasing pressure from precarious BOE, UK .N.Ireland protocol, UK Parliament Party gate fine, Soaring Energy prices, wage & retail contractions. If these factors keep at bay or settle then YES we do like longs in these areas, scaled in. Still risky to take too much conviction or risk at this stage. US market close into Asia open in FX spreads have widened significantly at certain periods overnight also.

Eye on FX options and the London 4PM Fix on Wednesday ahead of the extra long weekend in UK markets which will close for 4 day weekend.

💶🇪🇺 Given all the above factors, - Although some structured or fund models are looking for both sides of the Euro, we would rather sell rips in the Euro as high yield & EU Equities get ahead of themselves. Recession risk still looms, more surveys & economists calling a contraction globally in 6-10 months out. EURGBP .8640/60 if seen, EURAUD offer below 1.5290 ideally preferred. EURUSD only for day trade unless swinging small exposure.