IFX Market Report: Monday 30th May 2022

China is set to lift Beijing and Shanghai’s lockdown and the US Dollar is heading for its first monthly losses in over five months, and Europe start-ups part ways with their workforce as fundraising slows down.

On Sunday, Shanghai authorities said businesses could start to reopen without approval starting this Wednesday. In Beijing, major shopping centres had closed last month due to a Covid outbreak and reopened yesterday. The number of new Covid cases in the country fell to 20 on Sunday, down from 54 the day before. Shanghai, the financial hub of China, saw a Covid a rise in Covid cases two months ago which led to a lockdown of specific neighbourhoods and then of the entire city as the CCP applies a zero risk policy. Beijing saw several neighbourhoods locked down as well.

China’s restrictions had a bearish impact on the US dollar as several western companies saw their activity altered due to staff locked down such as Tesla or Volkswagen. The dollar index, which hit a two-decade high of 105.010 earlier in May, was flat at 101.70 this morning. However, positive consumer data in the United States and the easing of restrictive measures in China are helping to revive hopes for global growth, with investors having lowered their expectations of rising US interest rates and fears of a global recession having somewhat dissipated.
Trading is expected to be lightened on Monday as U.S. stock and bond markets are closed for the Memorial Day holiday.

In Europe, several large start-ups such as the fintech Klarna and the specialists in the delivery of races in a few minutes Gorillas and Getir announce that they are parting with part of their workforce. These budget cuts come as fundraising slows. These cuts come as inflation sees interest rates going up worldwide and consumer spending going down. Fundraising reached record levels last year with more than 120 billion in Europe, however venture capital has been slowing down for several weeks. According to CB Insights, start-ups raised $143.9 billion globally in the first quarter of 2022, down 19% from the last quarter of 2021. The number of deals fell 4.5% between the two periods.

Cable saw the US Dollar make slight gains on Friday after losses throughout the week. GBPUSD opened at 1.2625 and close slightly under 1.2614.

GBPEUR saw the Pound make small gains Friday as the pair opened at 1.1755 and closed to 1.1770.

EURUSD saw slight gains as USD showed progress Friday in fighting its goods trade balance deficit with the deficit going from -125.94B in May to -105.94B, In large part due to the Shanghai lockdown, but personal spending saw an increase of 0.9% despite the inflation. The pair opened at 1.0724 and closed at 1.0735

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