Traders scale back bets for rate hikes with expectations of the Fed, BoE and ECB drastically cut. The Dollar continues to climb as markets remain risk adverse, with Russia confirming intention to press forward with military advances.
March 2, 2022
GBP/USD 1.3284 GBP/EUR 1.2005 EUR/USD 1.1065 USD/CAD 1.2718 EUR/CHF 1.01819 EUR/SEK 10.7837 EUR/NOK 9.8993 EUR/DKK 7.4390 USD/ILS 3.2343 AUD/USD 0.7247 NZD/USD 0.6755 USD/SGD 1.3594 USD/JPY 115.22 USD/CNH 6.3220 USD/INR 75.7925 EUR/ILS 3.5787 GBP/ILS 4.2944 USD/ZAR 15.5447
GBPUSD declined further throughout the Asian session, falling 0.26% at time of writing as the Russia-Ukraine conflict continued to weigh on investor sentiment. The pound is now the second worst performing currency over the past week and month. Monthly houses prices continue to rise above expectation, with prices up 1.7% in February. The FTSE is up 0.6% on the London open.
Traders have parred bets on a 50bps interest rate increase from the Bank of England in their next meeting, following cautious comments from two key policy makers who previously voted for larger moves. Investors are still anticipating a 25bps hike, with 28bps priced in against 44bps just last week.EUR
EURUSD continues its decline, falling 0.5% to 22-month lows as markets remain risk-averse, the pair has dropped below 1.1100 this morning. Investors are scaling back ECB rate hike bets as well, with market expectations now priced in at 15bps by December compared to 35bps last week.
European Union ambassadors agreed to exclude seven Russian banks from the SWIFT network, however have not included the country’s biggest lender Sberbank PJSC and a bank part owned by gas giant Gazprom PJSC.
Emmanuel Macron is due to confirm his week that he will be a candidate in next month’s French presidential election. New polls and political commentators indicate the war in Ukraine has boosted his support to win a second term, as some rival candidates have faced scrutiny for their previous sympathies towards Putin.USD
The DXY continues to climb, trading 0.75% higher over the last 24hours as Russia confirms it will press forward with its military advances in Ukraine.
Global equity markets extended a sell-off yesterday as concerns grew over the impact of the aggressive sanctions. The S&P and Nasdaq both declined 1.6% although the sell-off has eased during Asian trading, reversing some losses. Demand for safe-havens led to a rally in global fixed-income, with the US treasury yield dropping 1.71%.
The economic risks caused by the ongoing conflict have also dampened expectations for aggressive rate hikes from the Fed, with markets now pricing out their initial expectation for a 50bps rise in March. Swaps linked to the Feds 16th March meeting suggest just 24.3bps of tightening is priced in.ASIA/PACIFIC
The invasion of Ukraine has forced Commodity prices to surge, as Russia and Ukraine combined, account for more than 25% of the global grains trade, whilst Russia is also rich in Oil and Gas. Wheat hit a 14-year high, whilst Brent oil topped $110 a barrel. The Bloomberg Commodity spot index jumped the most since 2009 to a record high.
The Aussie and Kiwi dollars advanced as commodity prices surged, both up 0.2% against the US Dollar. The ASX gained 0.28%. Elsewhere, equities declined with the Nikkei and Hang Seng trading down 1.6% and 1.8% respectively.ILS
USDILS continues to trade higher this morning, gaining 0.4% to trade around the 3.2350 level at time of writing. The pair added over 1% yesterday.Data & Events
Germany – Unemployment
Euro Area – Core Inflation Rate
UK – Nationwide House Prices
US – MBA Mortgage Applications
Fed Chair Powell testimony
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