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More Sanctions on Russia?
It’s April, so expect a surge in energy bills for the foreseeable future as the war in Ukraine fails to dwindle. As it stands Russia has been hit with soo many sanctions, affecting everything from their manufacturers, finance, private wealth, energy and technology, yet the real kickback seems to be heavier on the West. So the real question is, how many more sanctions can be thrown at Russia? BoE Governor Andrew Bailey held a speech earlier yesterday which failed to make an impact on sterling rates with the main takeaway being his statement that crypto is the new “front line” in criminal scams. The euro has found itself range-bound between 1.09 -1.11 against the dollar, mainly due to the continued attacks in Ukraine where progression in peace talks seems to be the only missing thing. Euro weakness pushed the pound higher, however, major central banks are focused on how they can move in alignment with the Fed’s aggressive rate hike plan to avoid losing ground against the dollar. With expectations pricing in successive 50bps hikes, we can only expect to see the dollar strengthen against counterparties. PMI figures for the UK come out this morning with U.S ISM data later this afternoon. As we know ISM is a leading indicator for the U.S economy and as a result the S&P 500, the greater reading compared to 50 the greater indication of a growing economy.
Apr 5, 2022 · 2 min read
Roll on April
Non-farm payroll fueled traders to bet on a stronger dollar after the BLS reported another month of solid job creation in March. Although the print came in at 431k vs 490k expected, unemployment in the U.S is back to pre-pandemic levels at 3.6% adding to speculation that the Fed might move forward with more aggressive rate hikes. Money markets had little movement over the course of Friday with cable rebounding off recent lows trading at 1.311 and the eurodollar slightly lower at 1.1050. In Europe, CPI figures came above expectations at 7.5% vs 6.6% forecast. President Lagarde uttered the same message to the markets that “you will see higher inflation this year, there is no question about that" whilst also re-affirming that Europe can avoid stagflation which is becoming more unlikely with Russia-Ukraine tensions. Pound-euro is trading above the year low, fueled by strong GDP figures recorded in the Uk Q4 of 2021. Price is holding onto the 1.18 handle. Later on this morning, Gov Andrew Bailey speaks on the state of monetary policy giving room for more speculation on the BoE’s rate hike plans.
Apr 4, 2022 · 1 min read
To start the morning off Q4 GDP YoY for the UK came in at 6.6% vs expectations of 6.5% boosting the pound against both the euro and dollar. Newfound optimism on the Russia-Ukraine ceasefire and peace talks quickly came to a halt after Russia indicated no material progress had been made. U.S equities shaved off gains made yesterday closing lower along with the European market whilst the FTSE was flat. Europe’s strongest economy Germany had a surge in inflation YoY printing 7.3% over March. Traders now bet the ECB will hike its deposit rate from negative 50bps to zero two months earlier than expected with Christine Lagarde stating that “The longer the war lasts, the greater the costs are likely to be”. As a result, we saw the euro gain against the dollar pushing through the 1.1140 level and taking the pound euro to new year lows around 1.1770. Oil and natural gas were back in the green following further attacks in Ukraine and on worries that citizens in Western Europe may be forced to ration fuel. For the dollar, ADP non-farm payroll, which represents private-sector employment, came in above expectations at 455k vs 450k expectations. We saw a surge in employment in the services sector as covid measures ease. To round up Q4 for the U.S GDP data came in at 6.9% vs forecasts of 7.1% expansion, the dollar slipped lower propping cable up to 1.3140. We have initial jobless claims release in the afternoon followed by FOMC member Williams speaking. With non-farm payroll tomorrow that is the piece of data to re-affirm the message of how the U.S labour market is tight and can withstand monetary tightening or if there are any gaps in their plans.
Mar 31, 2022 · 2 min read
Peace talk progress, risk-on
Today we have President Lagarde of the ECB and FOMC member George speaking within the day. Private employment figures are set to come out as well as Q4 GDP for the U.S which is expected to reach 7.1%. With peace comes risk… The euro stole the headlines over the past day with reports coming in that there has been overall positive progress with peace talks between Russia and Ukraine. Reports say that Russia has vowed to reduce northern Ukraine attacks as well as reduce military personnel in Kyiv. Moments later we saw the euro rocket against the dollar and the pound pushing rates past 1.110 on the euro-dollar and below 1.1820 on the pound euro. Any form of progress announced in Ukraine will fuel the ongoing call for rates to hit 1.15 on GBP/EUR which seems ever more likely upon revision. The pound struggled to hold ground against the dollar as a strong number of job vacancies was recorded for the month of February, however, the pound managed to close shy of 1.31. It wasn’t just the euro that felt capital inflows, major equity markets across Europe, UK and U.S closed higher with investors betting on further positive talks adding a sense of clarity to the market. Oil continues to retreat as Shanghai steps up restriction rules ahead of the OPEC meeting later this week. What to look out for this week We have our eyes on the public employment figures being released this Friday, the reading could either fuel optimism that the Fed can lower the 7.9% inflation whilst keeping the employment market tight or allow fears to seep in.
Mar 30, 2022 · 2 min read
In the last 24 hours, we saw sterling steal the show weakening heavily against the euro and dollar by almost 1%. As for the reason, Gov Bailey from the Bank of England held a speech that further re-affirmed the same message of UK economic weakness received at the last policy meeting. A dovish central bank and low consumer confidence shifted the overall appetite away from the pound. Risk-on or Risk-off? With U.S equities closing fairly flat it’s hard to get a proxy on the market’s direction over the past day. However, two important data releases are coming out this week, PCE and Non-Farm Payroll. Both releases will be sure to jolt markets up again. It’s clear to see that the Fed will act swiftly and aggressively to combat inflation numbers following their policy meeting held last week. The message received by investors settled positively as the dollar held firmly and initial jobless claims came in lower than expected. Despite all the recent positive data, the likelihood of a recession triggered by monetary policy remains high. Russia-Ukraine & Lockdown in Shanghai Russia-Ukraine cease-fire talks are set to be initiated later this week with little to no actual bearings on where we are with talks to end the fight. Crude’s biggest importer China has ordered Shanghai into lockdown, causing oil prices to plummet on fears that demand will dwindle for the commodity. Ports and major manufacturers, however, remain functional in Shanghai to offset even the slightest possibility of another global supply shortage which would be detrimental to inflation throughout the West.
Mar 29, 2022 · 2 min read