Forex Today: Bye bye easy money, hello carry trade?

What you need to take care of on Friday, May 13:

The American dollar soared on the back of risk-aversion. Panic selling hit equities and cryptos the most, as speculative interest priced in massive quantitative tightening. More and more central bankers are hinting at measures set to drain liquidity.

European Central Bank officials keep paving the way towards a July rate hike, while Bank of Canada Deputy Governor Toni Gravelle suggested that the central bank would need to raise rates above neutral.  Finally, Bank of England Governor Ramsden noted that inflation might not drop as fast as forecast, highlighting the need for more rate hikes.

It is worth noting that the US Federal Reserve is two steps ahead of other central banks, hiking rates by 50 bps in May and pledging for at least 2 or 3 more 50 bps hikes while drawing plans to reduce its balance sheet.

Adding to the ruling concerns, tensions escalate between Russia and the western world. Russian Deputy Chairman Dmitry Medvedev warned that military assistance for Ukraine risks creating a conflict between Russia and NATO. Meanwhile, Ukraine has announced it would suspend Gazprom gas transit on its territory. European Commission President Ursula von der Leyen said Russia was the “most direct threat” to the international order.

 Also, Russia menaced with retaliation should Finland join NATO. Earlier, Finland’s president  and the prime minister said that the country should apply to join NATO “without delay.”

EUR/USD fell to 1.353, now trading at around 1.0370. The GBP/USD pair plunged below the 1.2200 figure. The USD/CHF pair reached parity for the first time since December 2019, now trading at around 1.0040, while USD/JPY edged sharply lower, stabilizing at around 128.40.

Commodity-linked currencies edged lower against the greenback. AUD/USD is now at 0.6850, while USD/CAD trades in the 1.3040 price zone.

Spot gold reached a fresh monthly low, now changing hands at around $1,824 a troy ounce, while crude oil prices kept recovering, with WTI trading at $106.85 a barrel.

Global indexes closed in the red, although Wall Street managed to trim most of its intraday losses ahead of the close.

 US Treasury yields retreated amid renewed demand for safety.

Bitcoin price presents buying opportunity despite Coinbase Q1 losses and custody fears