S&P 500 Futures decline, yields stay firmer as inflation woes weigh on sentiment ahead of US NFP

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  • S&P 500 Futures track Wall Street’s losses, US Treasury yields pick up bids near late 2018 levels.
  • BOE bolstered risk-off mood amid hopes of surge in inflation and challenges to growth.
  • Recently mixed data from US, China joins other risk catalysts to underpin demand for safe havens like the US dollar.
  • US NFP is likely to ease in April but broadly robust employment scenario can defend greenback bulls.

Having witnessed an entertaining show of risk-aversion, market sentiment remains sour during early Friday as the previous concerns surrounding inflation and growth challenge the post-Fed optimism.

While portraying the risk-off mood, S&P 500 Futures drop back towards the yearly low marked earlier in the week, down 0.33% at the latest, whereas the US 10-year Treasury yields rose one basis point (bps) to 3.08%, surrounding the highest levels since late 2018 marked on Thursday.

After the Bank of England’s (BOE) double-digit inflation forecast, the Reserve Bank of Australia’s (RBA) quarterly Monetary Policy Statement also propelled inflation fears by drastically raising the expectations for 2022 and 2023 in its latest release. Also highlighting the price pressure are the Tokyo Consumer Price Index (CPI) data from Japan.

Hence, inflation is the key challenge to the global market and can stall the post-covid growth trajectory, which in turn doubts the Fed’s rejection of heavy rate hikes amid expectations of easing pain over time.

As a result, the rush to risk-safety renews the US dollar buying and weigh on the gold, as well as Antipodeans. It should, however, be noted that oil prices refrain from more downside as geopolitical fears surrounding the EU’s oil embargo on Russia and the OPEC+ plan to stay on the previous output hike policy favor energy buyers.

Looking forward, market players will pay close attention to the US employment data as Fed eyed a pause in the robust Nonfarm Payrolls (NFP), expected to ease to 391K from 431K. Also important will be the US Unemployment Rate which may also decline to 3.5% from 3.6% in April.

Also read: Forex Today: The BOE opened Pandora’s box