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Overview: With the US warning about a “vertical escalation” by a stymied Moscow and the EU cautioning that Beijing may send semiconductors and other tech hardware to Russia, it is little wonder that risk appetites are being curtailed ahead of the weekend. Japan eked out a small gain, most of the major bourses in the Asia Pacific region were lower. Of note the Hang Seng's 2.4% fall left it virtually flat on the week. Europe's Stoxx 600 is flat after posting two consecutive losing sessions. US futures are narrowly mixed. Benchmark yields are a couple of basis points lower, putting the US 10-year around 2.36%. European yields are 2-4 bp softer. Following a firmer than expected Tokyo March CPI, the 10-year JGB yield rose to a new high, just shy of 0.24%. In the foreign exchange market, the cautious risk stance is evident with the yen and Swiss franc showing modest strength. An exception to the risk-off is the relative strength of emerging market currencies. The JP Morgan Emerging Market Currency Index is up for the fourth sessions to put the finishing touches on the second weekly advance. Turning to commodities, gold is consolidating above $1950 and is up about… Read More »Markets turn cautious ahead of the weekend

Overview: With the US warning about a “vertical escalation” by a stymied Moscow and the EU cautioning that Beijing may send semiconductors and other tech hardware to Russia, it is little wonder that risk appetites are being curtailed ahead of the weekend. Japan eked out a small gain, most of the major bourses in the Asia Pacific region were lower. Of note the Hang Seng's 2.4% fall left it virtually flat on the week. Europe's Stoxx 600 is flat after posting two consecutive losing sessions. US futures are narrowly mixed. Benchmark yields are a couple of basis points lower, putting the US 10-year around 2.36%. European yields are 2-4 bp softer. Following a firmer than expected Tokyo March CPI, the 10-year JGB yield rose to a new high, just shy of 0.24%. In the foreign exchange market, the cautious risk stance is evident with the yen and Swiss franc showing modest strength. An exception to the risk-off is the relative strength of emerging market currencies. The JP Morgan Emerging Market Currency Index is up for the fourth sessions to put the finishing touches on the second weekly advance. Turning to commodities, gold is consolidating above $1950 and is up about… Read More »Markets turn cautious ahead of the weekend

Overview: With the US warning about a “vertical escalation” by a stymied Moscow and the EU cautioning that Beijing may send semiconductors and other tech hardware to Russia, it is little wonder that risk appetites are being curtailed ahead of the weekend. Japan eked out a small gain, most of the major bourses in the Asia Pacific region were lower. Of note the Hang Seng's 2.4% fall left it virtually flat on the week. Europe's Stoxx 600 is flat after posting two consecutive losing sessions. US futures are narrowly mixed. Benchmark yields are a couple of basis points lower, putting the US 10-year around 2.36%. European yields are 2-4 bp softer. Following a firmer than expected Tokyo March CPI, the 10-year JGB yield rose to a new high, just shy of 0.24%. In the foreign exchange market, the cautious risk stance is evident with the yen and Swiss franc showing modest strength. An exception to the risk-off is the relative strength of emerging market currencies. The JP Morgan Emerging Market Currency Index is up for the fourth sessions to put the finishing touches on the second weekly advance. Turning to commodities, gold is consolidating above $1950 and is up about… Read More »Markets turn cautious ahead of the weekend

The Fed keeps warning it will need to roll out the big guns in its battle against inflation. Traders have priced in faster rate increases to reflect this shift but the dollar hasn’t really benefited. Instead, it is the yen that has suffered. The coming week includes inflation stats from Europe and employment numbers from America, which combined could decide what’s next for euro/dollar. 

United States: From factories to construction sites, supply shortages slow activity Economic reports this week for both manufacturing and homebuilding shared two main themes: disappointing headline numbers, but plenty of backlogs for future work. Whether it is new homes or durable goods, the biggest clog in the production pipeline continues to be supply shortages, and it is increasingly evident that no part of the economy is spared from their pernicious effects. Next week: Personal Income & Spending (Thurs), Employment (Fri), ISM Manufacturing (Fri). International: U.K inflation soars to a 30-year high In the context of elevated global price pressures, inflation in the United Kingdom is showing no signs of slowing down anytime soon. The February CPI surprised to the upside, rising 6.2% year-over-year, as higher prices for energy and commodities have started to reverberate throughout the economy to affect prices more broadly. Next week: China PMIs (Thurs), Japan Tankan Survey (Fri), Eurozone CPI (Fri). Interest rate watch: Interest rate volatility near a decade-high The roller coaster ride for U.S. interest rates continued this week. By at least one measure, interest rate volatility is currently well above its average over the past decade and is nearing the highs reached during the peak of… Read More »Weekly economic and financial commentary

GBP/USD witnessed selling for the second straight day on Thursday amid modest USD strength. The Fed’s hawkish outlook, elevated US bond yields continued acting as a tailwind for the buck. The risk-on impulse capped the USD and assisted the pair to find support ahead of mid-1.3100s. The GBP/USD pair extended the previous day's rejection slide from the 1.3300 mark, or a two-and-half-week high, and witnessed some selling for the second successive day on Thursday. The intraday downfall dragged spot prices to a two-day low and was sponsored by modest US dollar strength. A slew of influential FOMC members, including Fed Chair Jerome Powell, left the door open for a larger rise in borrowing costs to bring down unacceptably high inflation. The speculations were further fueled by surging crude oil prices, which should continue to put upward pressure on the already elevated consumer prices. This, in turn, pushed the yield on the benchmark 10-year US government bond back closer to the  22-month high touched earlier this week and underpinned the greenback. Meanwhile, tensions in Ukraine have shown no signs of de-escalating. This, along with the lack of progress in the Russia-Ukraine peace negotiations, further benefitted the safe-haven buck. On the other… Read More »GBP/USD Outlook: Flag pattern favours bearish traders amid bets for bigger Fed rate hikes

Russia ranks 11th in the world in terms of GDP with $ 1.57 trillion, but this ranking does not reflect its enormous wealth of the country. If Russia stops supplying its raw materials and agriculture to the rest of the world, then is likely global economy will be heading for a recession as dozens of other products that are the cogs of a giant supply chain will be in short supply. In such a scenario, commodity prices will remain high with an upward trend thus central banks will be forced to flood the economy with liquidity. In fact, if citizens find it difficult to get fuel and food, a new round of printing will begin so that governments can support them. Money printing, however, cannot produce raw materials and agriculture so their prices will remain high. With commodity prices at high levels, a recession is very likely, and to deal with it will need to create even greater debts. Central banks will have to choose between recession or inflation. Although the appearance of one does not necessarily mean the elimination of the other. The US is likely to raise interest rates to curb inflation, but this will slow down GDP… Read More »The uncertainty will remain high, yet opportunities are there

EUR/USD remains depressed near the weekly low amid the emergence of some USD buying. The Russia-Ukraine crisis, Fed’s hawkish outlook acted as a tailwind for the safe-haven USD. Investors eye Eurozone/US PMIs, EU leaders summit and NATO meeting for a fresh impetus. The EUR/USD pair struggled to capitalize on the previous day's modest bounce from the 1.0960 area and met with a fresh supply on Wednesday amid the emergence of some US dollar buying. Tensions in Ukraine, so far, have shown no signs of de-escalating. Apart from this, the lack of progress in the Russia-Ukraine peace negotiations kept investors' on the edge. The market sentiment was further weighed down by concerns about surging oil prices, which continues to put upward pressure on the already high inflation due to the supply-chain bottleneck. This, in turn, took its toll on the global risk sentiment and drove some haven flows towards the greenback. The buck was further underpinned by hawkish comments from influential FOMC officials, signaling that they are ready to take more aggressive action to combat stubbornly high inflation. In fact, Fed Chair Jerome Powell, along with San Francisco Fed President Mary Daly and Cleveland Fed President Loretta Mester, indicated a bigger… Read More »EUR/USD Analysis: Bulls side-lined amid Ukraine crisis; NATO summit, EU/US PMIs in focus

European stocks have posted losses of around 1% on Wednesday, paring some of the gains we've seen over the last couple of weeks. We've clearly seen an improvement in sentiment recently as investors have become encouraged by the negotiations between Ukraine and Russia and the impact that's had on global commodity prices. There remains enormous uncertainty though which may limit any upside we see going forward given the scale of the rebound we've seen. There doesn't appear to have been a major step forward in negotiations in recent days and the bulk of the hard-hitting sanctions were levied against Russia shortly after the invasion. While further measures have been announced since, it seems a lot of the disruption was priced in early. We are seeing oil and gas prices rallying today which may be contributing to the declines we're seeing in equity markets, given the additional pressures that will put on households and businesses should it be maintained. The decision by Vladimir Putin to insist on payments from hostile nations for Russian gas to be made in rubles has caused a stir today. European gas prices have spiked on the back of the announcement, given how big an importer the… Read More »Stocks slip as oil and gas surge

Calm in talks, lack of fresh pressure on China implies potential progress.  Ukraine's proposed referendum and Russia's struggles also provide hope.  The dollar would fall on any deal, but a comprehensive accord is needed for a lasting effect. It might be darkest before dawn – the Russia-Ukraine war seems stuck in the mud after a month of fighting, but this stalemate could be a prelude to a deal. 1) Quiet talks: there has been no news from the negotiating table for a few days. When diplomats talk to the press, it is usually a sign that there is no progress and that they are trying to accuse the other side of failing to compromise. The current calm is a source of optimism – no news is good news. 2) UA Referendum: Ukraine's President Volodymyr Zelenskyy said that any deal would require a referendum. He seems to be preparing the public for some compromise – perhaps not only on NATO membership but also other matters. If he concedes territory to Russia, public support is needed for him not to be seen as a traitor. Laying the groundwork for a deal implies one has a higher chance to occur. 3) RU stuck… Read More »Russia-Ukraine War: Five reasons a deal may be closer than it seems, what it means for the dollar