Thursday 31 March 2022

Euro dips amid caution over Ukraine, Norwegian crown plunges

The euro edged lower on Thursday on caution about developments in Ukraine and limited progress in peace talks, while the Norwegian crown fell sharply after the central bank decided to buy foreign currency. Russian forces prepared for new attacks, Ukrainian President Volodymyr Zelenskiy said, while no quick resolution is expected from peace talks that will resume on Friday. The euro dropped 0.3% to $1.1118 after hitting its highest since March 1 at $1.1184. "The single currency is always around $1.11, with investors still cautious about future developments in Ukraine," Roberto Mialich, forex analyst at Unicredit (MI:CRDI), said. "The market wants to believe in a peace deal or at least in a truce in Ukraine. This is why rouble remains not far from its pre-war levels against the dollar, and the greenback is struggling to appreciate," he added.The dollar index, which tracks the U.S. currency against six peers, rose 0.2% to 98.074.

The rouble was down 3% versus the greenback at 78.55

Investors also focused on the next European Central Bank's moves after robust inflation data. ECB chief economist Philip Lane said on Thursday euro zone inflation was increasingly likely to stabilise around 2% but the ECB should be ready to change course if the outlook deteriorates due to Russia's war in Ukraine. [nL5N2VY2NL]

“Until the risk of an energy crisis and considerable economic effects resulting from the Ukraine war have been banished, the ECB is likely to hesitate to make a clear commitment,” Antje Praefcke, forex analyst at Commerzbank (DE:CBKG), said in a note to clients.

“And as a result, it will also be a while before the euro can appreciate on a sustainable basis,” she added.

Money markets are currently pricing in an around 85% chance of 20 basis points (bps) of ECB rate hikes by July 2022 and 60 bps by year-end. [IRPR]

The Norwegian crown plunged after oil prices dived and the central bank said it would buy foreign currency for its sovereign wealth fund in April.

Norges Bank plans to exchange 2 billion crowns ($231.9 million) per day into foreign currency, which will in turn be invested abroad by the wealth fund, already the world's largest with assets of $1.3 trillion.

The Norwegian currency fell 1.6% against the euro hitting its lowest level since March 18 of 9.7111, and 1.9% versus the dollar at 8.7255.

However, it is not far from its highest since October 2018 against the euro at 9.4424 and its highest since November 2021 versus the dollar at 8.5675, which it hit last week on the back of a rally in Brent crude oil futures.

"The central bank move might curb the currency, but we think the Norwegian crown still has room for further appreciation, thanks to expectations of more rises in energy prices," Unicredit's Mialich argued.

Other commodity currencies, such as the Australian and New Zealand dollar, dropped by around 0.5%.

The Swedish crown was slightly lower against the euro, just off its highest since January of 10.3059 hit on Wednesday as the central bank said it would have to tighten monetary policy this year.

Bitcoin was down 0.2% at $47,191, while Ether, the world's second-largest cryptocurrency, was up 0.45% at $3,402. 


Comment on Gold on March 31, 2022:

 ๐Ÿ“• Comment on Gold on March 31, 2022:

 - In yesterday's trading session, precious metal Gold bounced up exactly as analyzed when it increased from 1915 to 1938 ($23), closing the day session with a bullish candle around the 1932 price range.  closed with a bullish candle, but in my opinion, this upward force is not strong and has not reflected much, it is likely that there will be 1 more decline before increasing again.

 - My personal view in today's trading session is that Gold will drop to around 1908-1914.  Here we will look at the possibility of buying this precious metal.  I will update then.

Wednesday 30 March 2022

EUR/USD pares back from multi-week highs in 1.1160s, still well supported after hot EZ inflation readings


  • EUR/USD has pulled back from earlier multi-week highs in the 1.1160s but remains well supported in the 1.1140 area.
  • USD continues to suffer from broad weakness versus the majority of its G10 counterparts despite less optimistic Russo-Ukraine updates.
  • Meanwhile, hot Eurozone inflation data has encouraged euro buying as US data comes into focus.

Though the pair has waned from its earlier multi-week highs in the 1.1160s after selling pressure ahead of the 50-Day Moving Average near 1.1180 emerged, EUR/USD continues to trade with healthy on-the-day gains of about 0.4% in the 1.1130s. The US dollar continues to suffer from broad weakness versus the majority of its G10 counterparts, even as recent tailwinds in the global equity space subside amid less optimistic headlines regarding Russo-Ukraine peace talks, lifting EUR/USD. Another factor likely encouraging euro buying against the buck is recent hot inflation readings coming out of the Eurozone which, as ECB President Christine Lagarde this morning remarked, support the ECB’s recent shift towards ending QE in Q3 and signaling rate hikes in Q4.

Ahead of the release of preliminary national German Consumer Price Inflation metrics for March at 1300BST, regional state CPI data releases earlier in the session saw sizeable MoM and YoY gains. Meanwhile, the preliminary estimate of Spanish headline HICP inflation in March hit a staggering 9.8%, well above the 8.1% expected. Upcoming German inflation figures are expected to be hot and thus may not provoke a market reaction, and EUR/USD focus will quickly shift to US data scheduled for release shortly after. US private payroll company ADP releases its estimate of US employment change in March at 1315BST and, though ADP’s metric has been a poor predictor of the official NFP in recent months, traders will nonetheless take note.

Shortly after at 1330BST, the final estimate of US GDP growth in Q4 2021 will be released and there will be remarks from Fed’s Thomas Barkin, Raphael Bostic and Esther George, all of whom support the Fed’s recent hawkish shift. Fed hawkishness/strong economic data is arguably well priced into USD at this point, and further profit-taking on US dollar longs coupled with inflationary Eurozone data may well mean EUR/USD remains supported above 1.1100 and eyes a move towards 1.1200.

 Dow Jones Futures Fall 80 Pts; ADP, GDP Data and Lululemon Results in Focus

U.S. stocks are seen opening lower Wednesday, handing back some of the recent gains as investors await key economic reports on jobs and economic output while monitoring developments in Ukraine.

At 7 AM ET (1100 GMT), the Dow Futures contract was down 80 points, or 0.2%, S&P 500 Futures traded 13 points, or 0.3%, lower and Nasdaq 100 Futures dropped 70 points, or 0.5%.

The main Wall Street indices closed higher Tuesday, with the blue-chip Dow Jones Industrial Average ending 338 points, or 1% higher and the broad-based S&P 500 gaining 1.2%, both registering their fourth straight day of gains, while the Nasdaq Composite climbed 1.8%.

Helping the tone Tuesday were signs of progress in the peace talks between Ukraine and Russia in Turkey. However, optimism has quickly turned into skepticism, with a Pentagon spokesman saying Ukraine’s capital Kyiv remains under threat even after Russia promised to scale back military operations there. 

“Nobody should be fooling ourselves by the Kremlin’s now-recent claim that it will suddenly just reduce military attacks near Kyiv or any reports that it is going to withdraw all its forces,” John Kirby said. It’s “a repositioning, not a real withdrawal” from positions around the Ukrainian capital.

Also catching the interest of investors are a series of important data releases given the Federal Reserve is in the process of weighing up how aggressively to hike interest rates at its May meeting.

Expectations of sharp interest rate increases saw the 2-year Treasury yield briefly climb above the 10-year for the first time since 2019, a move that is often seen as a warning of an upcoming recession.

March's ADP nonfarm employment change data is set to be released at 8:15 AM ET (1215 GMT), with consensus forecasts looking for companies to have added 450,000 jobs, while GDP for the fourth quarter, at 8:30 AM ET, is set to show a 7.1% reading from the month before, well above the previous 2.3% release.

In the corporate sector, Micron Technology (NASDAQ:MU) traded higher premarket after the company gave a robust forecast for the ongoing quarter, suggesting demand from data centers remains strong.

Lululemon (NASDAQ:LULU) will also be in the spotlight after the athletic apparel maker beat quarterly earnings estimates and announced a $1 billion stock buyback program. 

Oil prices rose Wednesday, rebounding after a two-day retreat following a fresh reminder of the tight nature of the market as data showed U.S. crude stocks fell sharply last week.

Data from the industry body, the American Petroleum Institute, showed U.S. crude inventories fell by 3 million barrels in the week ended March 25. The official data from the Energy Information Administration is due later in the session.

The oil market had dropped sharply this week on progress in the Ukraine/Russia peace talks as well as demand worries over fresh Covid-19 lockdowns in China, the world’s largest crude importer. 

By 7 AM ET, U.S. crude futures traded 2.5% higher at $106.84 a barrel, while the Brent contract rose 2.4% to $110.29. 

Additionally, gold futures rose 0.4% to $1,919.20/oz, while EUR/USD traded 0.4% higher at 1.1129.

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Tuesday 29 March 2022

Singapore: Industrial Production remains robust – UOB

 Economist at UOB Group Barnabas Gan reviews the latest industrial production figures in Singapore.

Key Takeaways

“Industrial production surged 17.6% y/y (+16.6% m/m sa) in Feb 2022, surprising market expectations for a 6.3% y/y (+5.7% m/m sa) growth. Excluding biomedical manufacturing, industrial production rose 16.8% y/y.”

“The strong performance in Singapore’s manufacturing sector is underpinned by the global trade recovery, especially on the back of healthy semiconductor- and biomedical-related demand. Other factors that have supported Singapore’s manufacturing momentum also include the gradual reopening of international borders, which resulted in higher levels of maintenance, repair and overhaul activity from commercial airlines.”

“In all, our outlook is for full-year manufacturing to grow by an average of 4.0% in 2022. This suggests that despite the high-base growth rate seen in 2021, global trade activity is expected to stay buoyant in the new year.”

 GBP/USD rebounds from near two-week low, flat-lined below 1.3100 amid risk-on mood

  • GBP/USD witnessed some intraday selling on Tuesday amid renewed USD buying interest.
  • Hawkish Fed expectations, rising US bond yields continued acting as a tailwind for the buck.
  • A positive risk tone capped gains for the safe-haven USD and helped limit losses for the pair.

The GBP/USD pair quickly recovered a few pips from a near two-week low touched in the last hour and was last seen trading around the 1.3175-1.3180 region, nearly unchanged for the day.

The pair struggled to preserve its modest intraday gains to the 1.3115 region and turned lower for the fifth successive day on Tuesday amid the emergence of fresh US dollar buying. Rising bets for a 50 bps rate hike at the next two FOMC meetings turned out to be a key factor that continued acting as a tailwind for the buck.

The market expectations for a more aggressive policy response by the Fed to combat high inflation was reinforced by elevated US Treasury bond yields. In fact, the yield on the benchmark 10-year US government bond moved back above the 2.5% threshold, or back closer to a nearly three-year peak and underpinned the greenback.

The British pound was further pressured by the overnight dovish sounding remarks by the Bank of England Governor Andrew Bailey, saying that they are seeing evidence of an economic slowdown. Bailey stuck to the tone from this monthly policy decision, wherein officials softened their language on the need for further interest rate hikes.

This was seen as another factor that exerted additional pressure on the GBP/USD pair. That said, a generally positive risk tone, bolstered by hopes for progress in the Russia-Ukraine peace talks, capped the safe-haven USD and helped limit the downside for the GBP/USD pair. This, in turn, warrants some caution for bearish traders.

Hence, the market focus will remain glued to fresh developments surrounding the Russia-Ukraine saga. The incoming geopolitical headlines will influence the broader market risk sentiment. This, along with the US bond yields, will drive demand for the USD and produce some short-term trading opportunities around the GBP/USD pair.

Later during the early North American session, traders will take cues from the US economic docket - featuring the release of JOLTS Job Openings and the Conference Board's Consumer Confidence Index.

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Monday 28 March 2022

GBP/USD Price Analysis: Seems vulnerable near 1.3100 mark, bearish flag breakdown in play

The GBP/USD pair extended last week's retracement slide from the 1.3300 mark, or the 200-period EMA on the 4-hour chart and witnessed some follow-through selling on Monday. This marked the fourth successive day of a negative move and dragged spot prices to over a one-week low, around the 1.3110 region during the mid-European session.

The US dollar continued drawing support from rising bets for a 50 bps Fed rate hike move at the May meeting. Conversely, the sterling was weighed down by dovish remarks from the Bank of England Governor Andrew Bailey, saying that we are starting to see evidence of a growth slowdown. This, in turn, exerted downward pressure on the GBP/USD pair.

 Looking at the broader picture, the pair on Friday confirmed a break through an ascending trend channel, which constituted the formation of a bearish flag pattern. Sustained weakness below the 1.3100 round-figure mark will further validate the bearish bias and set the stage for a further near-term depreciating move for the GBP/USD pair.

The next relevant support is pegged near the 1.3070 region, below which the downward trajectory could further get extended towards the 1.3035 intermediate support. The GBP/USD pair could eventually drop back to challenge the key 1.3000 psychological mark, or the lowest level since November 2020 touched earlier this month.

On the flip side, attempted recovery moves might now confront stiff resistance near the 1.3150-1.3160 region. Any subsequent move up is more likely to attract fresh selling and remain capped near the 1.3180-1.3185 zone. This is closely followed by the 1.3200 mark, which if cleared decisively might prompt some short-covering around the GBP/USD pair.

GBP/USD 4-hour chart


Gold Price Forecast: XAU/USD under pressure amid surging bond yields 

Gold price is weaker as the new week gets underway. Surging US Treasury bond yields and the dollar on the front foot are dragging down the yellow metal, economists at Comemrzbank report.

Rising interest rate expectations weight on gold

“Gold fell sharply to start the week. We attribute this on the one hand to the US dollar, which is continuing to appreciate. And on the other hand, bond yields are climbing further.” 

“We believe the rise in yields and thus the increase in real interest rates are due to the higher interest rate expectations of market participants. The Fed Fund Futures are meanwhile pricing in rate hikes of 90 basis points at the next two meetings of the US Federal Reserve. In our view the gold price is holding its own impressively well against this backdrop.”

“ETF investors have also not allowed themselves to be deterred as yet: the gold ETFs tracked by Bloomberg registered inflows of 43 tons last week – already their tenth weekly inflow in succession. By contrast, speculative financial investors have withdrawn further from gold, according to the CFTC’s statistics: they slashed their net long positions by 9% to a six-week low in the week to 22 March.”
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Saturday 26 March 2022

XAU/USD Price Forecast: Technical outlook

 Gold (XAU/USD) bias is still up, but it would remain under selling pressure. Failure to reclaim February 24 daily high at $1974 left the precious metal exposed to selling pressure unless XAU bulls recover the aforementioned. It is worth noting that the 200-day moving average (DMA) at $1816.85, from an upslope, is horizontal, indicating that the steep rally above $2000 might be subject to a further correction lower.

Upwards, XAU/USD’s first resistance would be $1974. Once cleared, the next resistance would be $2000, and the YTD high at $2075.82.

On the flip side, and the most likely scenario, XAU/USD’s first support would be March 20 low at $1950.30. Breach of the latter would expose March 16 daily low at $1895.06, followed by November 16, 2021, low at $1877.14.

Friday 25 March 2022

USD/JPY to suffer a decline toward 121.00 but still targeting mid-120s – OCBC

 USD/JPY pushed through 122.00 on Thursday. Some retracement is seen today, though in the near-term, the focus will still be on USD/JPY upside as the pair pushes closer to mid-120s. 

Technical pull-backs on the cards

“Even as we are structurally positive on the USD/JPY towards the mid-120s, do not rule out technical pull-backs. The 121.00 locus may be the first support in that case.”

“For now, the BoJ and Fin Min have refrained from directly commenting on JPY weakness.”

Euro edges higher as focus on Ukraine, yen rebounds vs dollar

The euro was edging higher on Friday, but concerns about a potential slowdown of the economy kept it in a tight range, while the dollar weakened as investors priced in the expected monetary tightening from the Federal Reserve.

"The combination of lingering Russia-related risks, high energy prices and Fed-ECB policy divergence still points to a weaker, rather than stronger, EUR/USD,” ING analysts said.

"EUR-USD remains quite stuck at around 1.10, with better-than-expected PMI surveys across the eurozone for March not sufficient to induce buying interest,” Unicredit (MI:CRDI) analysts said in a research note.

German business morale deteriorated in March due to worsening supply chain issues resulting from high petrol prices and driver shortages, a survey showed on Friday.

The single currency rose 0.1% to $1.1016

Derek Halpenny, head of global research markets at MUFG, said in a note to clients that some renewed optimism over the prospect of the end of the conflict in Ukraine “helped improve financial market conditions and weaken the U.S. dollar.”

President Volodymyr Zelensky said that Ukrainians "need to achieve peace" and halt Russian bombardment.

The U.S. dollar index, which measures the greenback against six peers, edged 0.1% lower to 98.631

BofA analysts underlined markets priced in next moves from the Fed even before it started and a lot more rapidly than during the previous tightening cycle between 2015 and 2018.

Money markets are betting on 190 bps of Fed rate hikes by year-end, including an 80% chance of a 50 bps in May. [IRPR]

Japan’s yen staged a rebound versus the greenback, up 0.6%, after hitting a fresh low since December 2015 overnight on the difference in rate hike expectations between the Bank of Japan and other major central banks.

Analysts flagged that the Bank of Japan (BOJ) provided a bullish signal as it refrained from stepping into the market Friday morning, even as the 10-year government bond yield rose above the level at which the central bank had offered to buy an unlimited amount in February.

However, Governor Haruhiko Kuroda clarified that a weak yen benefits the economy.

“We don't expect a significant further depreciation of the yen versus the dollar. We think that at 115, it is fairly valued considering the Japanese central bank's dovish stance,” Roman Ziruk, market analyst at Ebury, said.

The Norwegian crown was down 0.2% lower against the euro after rising the previous day as the central bank raised its benchmark interest rate and said it now plans to hike at a faster pace than previously intended.

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Thursday 24 March 2022

AUD/USD to advance back toward 0.75 by year-end – ANZ

 After a tough start to the year, the AUD has rebounded convincingly to become one of the leaders in the G10. Economists at ANZ Bank expect the AUD/USD to move sideways in the near-term before staging a leg higher to the 0.75 level by year-end.

“The terms of trade improvement and a strong domestic economy are likely to keep the AUD well supported, though a challenging risk environment will keep rallies capped.”

“We believe the aussie will be mostly rangebound through the middle part of 2022 before a global growth recovery helps propel a move back to 0.75 by year-end.”

 GBP/USD struggles near two-day low, just above mid-1.3100s post

  • A broad-based USD strength dragged GBP/USD lower for the second straight day on Thursday.
  • The mixed UK PMI prints failed to impress bullish traders or provide any impetus to the major.
  • The market focus remains glued to fresh developments surrounding the Russia-Ukraine saga.

The GBP/USD pair maintained its offered tone through the first half of the European session and had a rather muted reaction to mixed UK PMI prints. The pair was last seen trading just above mid-1.3100s, down nearly 0.35% for the day.

The pair extended the previous day's sharp retracement slide from the vicinity of the 1.3300 mark, or over two-week high and witnessed some follow-through selling for the second straight day on Thursday. The downtick was exclusively sponsored by a stronger US dollar, which continued drawing support from the Fed's hawkish outlook.

In fact, comments by influential FOMC members, including Fed Chair Jerome Powell, have been fueling speculation that the Fed would adopt a more aggressive policy response to combat high inflation. The markets were quick to react and started pricing in the possibility of a 50 bps rate hike at the upcoming meeting in May.

This was reinforced by elevated US Treasury bond yields, which were further underpinned by concerns that surging crude oil prices could put further upward pressure on already high consumer prices. Apart from this, the lack of progress in Russia-Ukraine peace negotiations further benefitted the safe-haven greenback.

On the other hand, the British pound was pressured by a dovish assessment of the Bank of England policy decision last week and its view around the need for future rate hikes. Bulls failed to gain any respite from an unexpected rise in the UK Services PMI, which was offset by a larger drop in the gauge for the manufacturing sector.

Market participants now look forward to the US economic docket, featuring the release of the fllash PMI prints, Durable Goods Orders and the usual Weekly Initial Jobless Claims. The focus, however, will remain on geopolitics amid expectations that US President Joe Biden will announce new sanctions targeting Russian politicians.

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Gold Price Forecast: XAU/USD stays on the way to $1,960, NATO, yields eyed
  • Gold prices stay above short-term key resistance, now support, despite retreating from weekly top.
  • Yields underpin USD rebound but all depends upon today’s NATO summit, US data.
  • Intraday bears may take entries below $1,937 but $1,930 holds the key for further weakness.

Gold (XAU/USD) bulls faced rejection around $1,949 heading into Thursday’s European session, having cheered the pullback in US Treasury yields with the biggest daily jump in two weeks the previous day.

That said, the yellow metal’s pullback could be linked to the firmer US dollar and a rebound in the T-bond yields, which in turn take clues from hawkish Fedspeak and fears of an escalation in the Ukraine-Russia war.

Also underpinning the US dollar’s safe-haven demand is the covid resurgence in China and Europe, as well as market’s anxiety ahead of the US preliminary PMIs for March and Durable Goods Orders for February.

Additionally, risk-negative headlines ahead of US President Biden’s meeting with the North Atlantic Treaty Organization (NATO) allies in Europe also challenge gold prices of late.

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Wednesday 23 March 2022

forexadviseclub Expands Trading Services in Canada

 forexadviseclub the brokerage brand owned by StoneX Group, announced on Wednesday that it has expanded its trading services in the Canadian market.

Services in the market are being offered by the locally established GAIN Capital- Canada Limited but under its generic brand. Its offerings are fully regulated as it is a member of the Investment Industry Regulatory Organization of Canada and also of the Canadian Investor Protection Fund.

“Our mission at StoneX is to open markets, and this expansion of our offering in the Canadian market is an important part of providing comprehensive access to the retail investor,” said the CEO of StoneX Group, Glenn Stevens.

Last October, the broker started offering its services in the Latin American markets under a Cayman Islands license.

Tuesday 22 March 2022

precious metal Gold went right in its analysis from 1918 to 1941


๐Ÿ“• Comment on Gold on 22/03/2022:

 - In yesterday's trading session, precious metal Gold went right in its analysis from 1918 to 1941, closing the session with a bullish candle around 1935. This increase in my opinion does not reflect too much and  Gold is mostly moving sideways in a large range.

 - The current resistance area for this precious metal is around 1940-1945 and support is below 1912-1918.  Investors can wait for the price reaction of Gold at these two margins to consider the option to order. 

Friday 11 March 2022

After falling to 1970 precious metal Gold has shown signs of recovering back to around 2009, closing yesterday's session around 1996.After falling to 1970 precious metal Gold has shown signs of recovering back to around 2009, closing yesterday's session around 1996.

 ๐Ÿ“• Comment on Gold on 11/03/2022:

 - After falling to 1970 precious metal Gold has shown signs of recovering back to around 2009, closing yesterday's session around 1996. This shows that the downward pressure of Gold shows signs of slowing down.  In addition to the current developments and news, there is still no sign of any signs of the war cooling down, de-escalating as the Russian army continues to move towards the capital Kyiv and open more.  attacks on major cities of Ukraine.  In my personal opinion, the possibility of Gold will still be pushed up in today's trading session.

 - On the h4 time frame we can see the closest support for this precious metal is around the 1973-1982 range.  Here, investors can establish a buy position with a safe target around the 2008-2015 threshold.

Monday 7 March 2022

Euro set for biggest 3-day drop in 2 years as oil prices soar

 The euro tanked more than 1% versus the dollar on Monday and was on track for its biggest three-day loss in two years as soaring oil prices stoked fears of a stagflationary shock that could hammer European recovery hopes.

The single currency's drop was broad-based, with the currency flirting with parity versus the Swiss franc after having briefly dropped below it in early Asian trading. It fell more than 0.5% versus the yen and the Australian dollar.

The conflict in Ukraine and harsh international sanctions on Moscow have sent Russian assets tumbling, while prices of the country's exports such as precious metals, oil and gas have soared at a time when the global economy was already grappling with inflationary pressures.

Europe is the most vulnerable as it imports as much as 40% of its natural gas from Russia and the single currency has become increasingly correlated with oil prices - the higher oil climbs, the more the euro falls as investors fret about higher inflation and the blow to the economy.

"The euro continues to absorb the most pressure of major currencies on the fallout from the war in Ukraine," said John Hardy, head of FX strategy at Saxo Bank.

In volatile London trading, the euro fell more than 1% to $1.0806, a May 2020 low. On a cumulative basis, the single currency has weakened nearly 3% versus the greenback in the last three trading sessions, its biggest drop since the pandemic slammed into markets in March 2020.

It is down almost 4% since Russia began what it calls a "special military operation" in Ukraine and is not far from testing its 2020 trough of $1.0636.


Oil prices soared again on Monday as the risk of a U.S. and European ban on Russian product and delays in Iranian talks sent prices soaring to the highest levels since 2008. [MKTS/GLOB]

"The melt-up in commodity prices ramps up the risk of a stagflationary shock for the euro zone and complicates the policy outlook for the ECB," said an FX strategist at a European Bank in London.

According to Goldman Sachs (NYSE:GS), a sustained $20 oil rise shock would lower real economic growth in the euro area by 0.6% and by 0.3% in the United States. But in a more adverse scenario if Russian gas shipments via Ukraine were curtailed, then euro area GDP could fall by as much as 1% from gas alone.

The euro also fell to a 15-month low of 124.39 yen and touched its lowest since mid-2016 against the pound at 82.01 pence. Against the Aussie, the euro has lost more than 10% over about a month.

Derivative markets pointed to more pain for the single currency. Three-month euro risk reversals plunged to its lowest levels since December 2011, indicating a rush to buy euro puts.

Against a basket of its rivals, the dollar gained 0.5% to 99.40, its highest levels since May 2020.

Friday 4 March 2022

Euro sinks to multi-year lows versus dollar, Swiss franc and sterling

The euro fell to a seven-year low versus the Swiss franc and hit its lowest point in almost two years versus the dollar on Friday as the war in Ukraine lowered expectations of European economic growth.

The European single currency fell 2.1% this week, and was set for its worst week since April 2020.

It was down 0.5% to $1.1010 at 0850 GMT, near its weakest level since May 2020, following news Russian forces seized the largest nuclear power plant in Europe after a building at the complex was set ablaze during fighting with Ukrainian defenders, Ukrainian authorities said on Friday.

Authorities later said the fire in a building identified as a training centre had been extinguished. U.S. Energy Secretary Jennifer Granholm said there were no indication of elevated radiation levels at the plant.

Versus sterling, the euro also hit its weakest level of 82.61 pence since July 2016. It touched its lowest level since January 2015 of 1.0114 against the safe-haven Swiss Franc.

Analyst said the effects of surging energy and gas prices will likely undermine European consumption and economic growth prospects.

"The ECB is going to have no alternative but to look through this surge in inflation but the Fed is not going to delay so we will see more monetary divergence again," said Mike Kelly, head of global multi-asset at PineBridge Investments.

"The dollar should be getting a new spring in its step structurally if things do get worse," Kelly added.

The U.S. dollar index rose 0.36% to 98.073, after touching its highest level since June 2020 against a basket of peers.

While money markets do not expect interest rate hikes at the ECB's next meeting, the U.S. Federal Reserve is all but certain to raise interest rates at its March 15-16 meeting for the first time since the coronavirus pandemic.

Fed Chair Jerome Powell repeated his comments that he would back an initial quarter percentage point increase in the benchmark rate.

In Ukraine, Russian forces were pressing on with surrounding and attacking cities.

Elsewhere, the Australian dollar continued its advance, helped by the commodities boom, and rose 0.6% to a four-month high of $0.7370 versus the U.S. dollar.

High energy prices in turn have prevented the Japanese yen from benefiting as much from the safe haven flows, as Japan is a net importer of energy.

The yen briefly climbed on the dollar when news of the fire emerged, but later gave up those gains and was little changed at 115.37 per dollar.

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