EUR/USD: A test of the March 7 low near 1.0805 is still in the cards – BBH

 The euro bounced after the French election but remains heavy near 1.09. Economists at BBH note that the EUR/USD pair may test the March 7 low near 1.0805.

Run-off will be held between Macron and Le Pen

“Macron got 28% of the vote vs. 24% for Le Pen in the first round. One early poll shows Macron winning 54-46% in the second round, while another one is a lot closer at 51-49%. We warn of the so-called Bradley effect, which suggests that the polls will likely understate Le Pen’s support. If polls tighten up ahead of the runoff, we expect markets to become more jittery.”

“A break above 1.1050 is needed to signal a deeper correction towards the March 31 high near 1.1185.” 

“A test of the March 7 low near 1.0805 is still in the cards.”

📕Analysis on Gold on March 1, 2022:

- In yesterday's trading session, after the precious metal GAP rose to 1930, there were signs of decreasing and filling the GAP. Yesterday's closing session was around 1908. Although it ended the day with a bearish candle, it was a retreat candle and one more thing was that yesterday's Russia-Ukrainian negotiations were basically unsuccessful. As expected, there needs to be further negotiation so Gold still has many factors to boost the uptrend. - Moving to the H4 time frame, we can see that the price area around 1896-1900 is still the closest support area for precious metal Gold. Here we can establish a long position with a safe target around 1914 and expect 1920 in today's session.

Dollar retreats as risk appetite returns; U.S. inflation dials back Fed view

 MEW YORK (Reuters) - The U.S. dollar dipped on Friday, giving back some of the strong gains from the previous day, as investors gauged the latest round of sanctions on Russia and U.S. inflation data was seen as unlikely to make the Federal Reserve overly aggressive at its next policy meeting.

The greenback on Thursday notched its biggest one-day percentage gain since Nov. 10 to reach 97.74, its highest since June 30, 2020. However, it gave back some gains after U.S. President Joe Biden hit Russia with a wave of sanctions following that country's invasion of Ukraine, but refrained from imposing sanctions on Russian President Vladimir Putin and disconnecting Russia from the SWIFT international banking system.

U.S. economic data showed consumer spending increased more than expected in January even as price pressures mounted, with annual inflation hitting rates last seen four decades ago, although the personal consumption expenditures price index increased 0.6% in January after rising 0.5% in December.

"The revisions to income and spending data shows the economy was very resilient to Omicron and to high oil prices. Hopefully, the situation with Russia is short-lived, but even if oil prices stay elevated, the economy should have enough fundamental strength to tolerate high energy prices," said Brian Jacobsen, senior investment strategist at Allspring Global Investments in Menomonee Falls, Wisconsin.

"The inflation numbers weren’t great, but at least the month-on-month inflation numbers aren’t moving higher," Jacobsen said. "That should take some wind out from under the wings of the most hawkish Fed members."

The dollar index fell 0.459%, with the euro up 0.59% to $1.1257. The euro fell to $1.105 on Thursday, its weakest against the greenback since June 1, 2020.

Even with Friday's pullback, the dollar was still on track for a third straight week of gains.

The increased risk appetite was evident in the U.S. stock market, with the S&P 500 up more than 2% after staging a late session rally on Thursday.

Before Thursday's jump -- which sent the dollar to its highest level since June 30, 2020 -- the greenback had been subdued in recent weeks, as rising tensions in Ukraine fueled expectations the Fed may be less aggressive in tightening policy as it attempts to rein in inflation.

Expectations for at least a 50-basis-point interest rate hike at its March meeting have fallen to 25% from around 34% a day ago, according to CME's FedWatch Tool.

In the central bank's latest monetary policy report to Congress, the Fed warned inflation could last longer than anticipated should labor shortages and fast-rising wages continue.

The European Union is planning a third round of sanctions against Moscow, an EU official said on Friday, minutes after Ukraine's president pleaded with the bloc for faster, more forceful steps to punish Russia for its invasion of his country.

Policymakers at the European Central Bank (ECB) said the situation in Ukraine could cause the ECB to slow its exit from stimulus measures.

Investors see only a 4% chance the ECB will boost its benchmark interest rate by 10 basis points at its March 10 policy meeting. [IRPR]

The Russian rouble strengthened 1.67% versus the greenback to 83.04 per dollar after hitting hit a record low of 89.986 the day before.

The Japanese yen weakened 0.09% versus the greenback at 115.65 per dollar, while Sterling was last trading at $1.34, up 0.19% on the day.

In cryptocurrencies, bitcoin last rose 1.4% to $38,937.21.

Ethereum last rose 2.58% to $2,703.53.

rouble bonds over accusations of Moscow meddling in the U.S. election.

  - Western capitals have started putting in place fresh restrictions on Russia's sovereign debt as they seek to ratchet up pressure on Moscow over the conflict with Ukraine.

The United States and its allies introduced an initial round of sanctions after Russian President Vladimir Putin recognised two breakaway regions in eastern Ukraine on Monday. A string of harsher measures is expected after he launched a full-scale invasion on Thursday.

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Access to Russian bonds had become increasingly restricted. U.S. sanctions imposed following the 2014 annexation of Crimea made future Russian dollar-denominated debt ineligible for many investors and key indexes.

In April 2021, U.S. President Joe Biden barred U.S. investors from buying new Russian rouble bonds over accusations of Moscow meddling in the U.S. election.

Here is an overview of what measures have already been added and what impact they might have:

WHAT ARE THE NEW RESTRICTIONS ON SOVEREIGN DEBT?

Washington announced a ban on U.S. entities participating in secondary markets for both rouble and non-rouble debt issued by Russia's central bank, the national wealth fund and the finance ministry after March 1.

The European Union agreed new sanctions that will target the ability of Moscow to access the bloc's capital and financial markets as well as services, and ban EU investors from trading in Russian state bonds. Canada's government said it would bar its citizens from engaging in purchases of Russia's sovereign debt.

Britain said on Wednesday it would stop Russia selling sovereign debt in London - one of the world's major financial centres for such transactions. The measures would require additional legislation, according to Western officials, and clearing transactions would also be affected. However, there was no indication on whether Britain would stop trade in outstanding sovereign debt.

The coordinated measures are aiming to curb Russia's ability to raise new foreign financing and plug some loopholes. Despite the limitations in the United States, Russia had been able to issue bonds in European markets.

Analysts at JPMorgan (NYSE:JPM) calculate that Russia has issued a combined 3.5 billion in euro-denominated bonds since 2020.

IMPLICATIONS FOR INVESTORS

Analysts see limited implications for holders of existing hard-currency bonds.

They, however, predicted the new U.S. sanctions on local sovereign bonds, so-called OFZs, would lead to the creation of two different classes of OFZs.

In response to the U.S. curbs on local sovereign bonds, the finance ministry said it would offer only new series of OFZs starting from Feb. 22 and stop tapping issues registered before this date "to lower risks of forced selling of circulating state securities by particular categories of foreign investors."

JPMorgan said that bonds which had been sold since mid-June had a 10-25 bps premium over existing issues, though this divergence faded, likely due to bonds being added to the most widely used emerging fixed income benchmark.

"However, premia may be more persistent this time given that new OFZs will not be index eligible," said Nicolaie Alexandru-Chidesciuc at JPMorgan. "As long as local banks can freely transact with foreigners the basis between the two curves should remain relatively narrow (within 20-30bp)."

WHAT DOES THIS MEAN FOR CAPITAL FLOWS?

Latest data shows that Russia has just under $40 billion in dollar and euro-denominated bonds outstanding, with just over half held by foreign investors. Positioning in those bonds by foreign investors looked light and the most underweight in two decades, according to a JPMorgan emerging market client survey.

Meanwhile foreign investors held around 18% or 2.8 trillion roubles ($34.4 billion) of overall outstanding OFZs, according to ING.

The new U.S. sanctions are not expected to trigger forced selling in OFZs. However, capital flows have shown investors ditched the bonds as tensions over Ukraine have escalated since late last year.

"Russia is now experiencing the fifth consecutive month of foreign portfolio outflows from OFZ," said Chris Turner, global head of markets at ING. "In October-January it totalled $5.4 billion, and since the beginning of February, some $1.1 billion were withdrawn."

Russia currently has a weight of 6.8% in JPMorgan's local sovereign debt benchmark, though given the U.S. measures would see no new issues added while existing ones would mature, the weighting was expected to shrink to below 5% in just over three years, the bank projected.

JPMorgan, which runs some of the most widely-used hard and local currency fixed income indexes in emerging markets, said on Wednesday it was reviewing the impact the new U.S. curbs may have on its emerging market benchmarks.

($1 = 81.3255 roubles)

✍️ Analysis of Oil on 24/02/2022:

🔺 About news:
 - Oil prices rose 5% on news of Russian military activity.  At noon on February 24, the price of Brent oil futures at one point exceeded $102 per barrel before falling slightly to $101.  Meanwhile, the price of WTI oil also increased by nearly 5%, to nearly 97 USD per barrel.

 - Analysts said that if the situation in Ukraine continues to be "hotter", it will trigger a wave of sell-offs in the stock market.  Investors will flock to safe havens like gold.  Oil prices will also skyrocket, even reaching 150 USD/barrel.

 - Armed conflict not only poses a risk to the facilities of the mining, refining and petrochemical industries, but also causes supply to be tighter if Russia responds to sanctions by "locking the valve" of oil.

 - Europe, which imports 25% of Russian oil and 40% of gas, will be severely affected if the Kremlin cuts off the supply of 3 million barrels of oil per day to this region.

 "Russia meets 30-40% of the gas needs of the whole of Europe every year.  No other country can replace it, even providing gas in the form of liquefied petroleum gas,” Al-Kaabi said.  “LNG trading contracts are signed in the form of a permanent, clear shipping location.  It is impossible to replace this huge amount of gas with LNG immediately.”

 👉 In short, through the above news, we can see that the picture of the crisis in energy is pushed to the climax and the possibility of a further increase of oil is completely happening.  On the technical chart, the nearest price level that oil is heading to is 105-110$ and if there is a slight decline to around 90-94$, this is the ideal price area for us to establish a buy position.  with the same goal as above!