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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