The greenback started the week on a stronger note, but fell to Friday's levels even as US Treasury yields increased to levels not seen since before the pandemic. With growing fears in Eastern Europe, as well as the threat of rising stagflation in the eurozone, the euro is down on the day. ECB President Lagarde spoke to mitigate concerns, and the markets await tomorrow’s policy meeting. Oil prices rallied from last week’s slide, as WTI Crude nears $110 a barrel. Despite the jump in oil, commodity-linked currencies remain slightly down to start the week.
Events/Economic data this week:
Monday: EU Retail Sales YOY
Tuesday: Canadian Industrial Producing Prices, European Central Bank rate decision
Wednesday: UK CPI
Thursday: US Initial Jobless Claim, Toyoko CPI Ex-Fresh Food YoY, US Durable Goods Orders
Friday: University of Michigan Sentiment
March 21, 2022
EUR/USD 1.1034 GBP/USD 1.3173 USD/CAD 1.2592 AUD/USD 0.7409 USD/JPY 119.15 USD/CNH 6.3632 USD/ILS 3.2252 USD/MXN 20.3535 USD/CHF 0.9305 USD/INR 7.1220 USD/BRL 4.9742 USD/SGD 1.3555 USD/DKK 6.7425 USD/SEK 9.4390 USD/NOK 8.7415
The USD opened the week stronger than its G10 peers, then fell even as Treasury 2-Yr yields exceed 2% for the first time since May of 2019. US 10-Yr yields are at 2.23%. Fed Chairman Powell will speak today about the economic outlook at the National Association for Business Economics Annual Economic Policy Conference.GBP
The UK pound opened the week lower following the BoE’s dovish outlook from last week’s meeting. Last week, the BoE raised rates from 0.50% to 0.75% to help ease UK’s rising inflation which was 1% higher than expected. Traders are focused on this week's release of UK inflation data for February, which is expected to rise from January's.EUR
The Russian-Ukrainian war continued to escalate over the weekend, undermining the perceived riskier EUR. Amid growing concerns of stagflation in Europe, ECB President Lagarde said, “even in the bleakest scenario, with second-round effects, with a boycott of gas and petrol and a worsening of the war that goes on for a long time -- even in those scenarios we have 2.3% growth.” Lagarde also said that the ECB does plan to raise rates to tackle inflation, but they do not plan to move at the same pace as the US. Eurozone PPI for February of 4.4% MoM was much higher than 2.2% expected.CAD
The loonie weakened against the USD for the first time in five days as US yields boosted demand for the greenback, despite rising oil prices. WTI Crude is nearing $110 a barrel.ASIA/PACIFIC
USD/JPY trades around 119.00, a six-year high, as rising US interest rates push the yen lower. The yen's role as a safe-haven is not helping the currency at this time.
For more analysis on FX markets or information regarding SVB's FX services:
See all of SVB's latest FX information and commentary at www.svb.com/trends-insights/foreign-exchange-advisory
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