Powell hints Fed could hike by half a percent; EU to discuss curbs on Russian oil: Gap between 5- and 30-year treasury yields smallest since 2007.
March 22, 2022
GBP/USD 1.3177 GBP/EUR 1.1975 EUR/USD 1.1004 USD/CAD 1.2616 EUR/CHF 1.0282 EUR/SEK 10.4151 EUR/NOK 9.6539 EUR/DKK 7.4398 USD/ILS 3.2205 AUD/USD 0.7406 NZD/USD 0.6908 USD/SGD 1.3582 USD/JPY 120.46 USD/CNH 6.3729 USD/INR 76.1750 EUR/ILS 3.5436 GBP/ILS 4.2434 USD/ZAR 14.8797
London police have begun interviewing witness’ in the ‘Party gate’ saga. The PM has yet to be interviewed.
The Focus is now on the Chancellor Sunak, ahead of his spring statement tomorrow. The UK tax burden is expected to reach its highest point in 70 years under Sunak’s treasury. He is expected to resist the urge to spend, with tighter fiscal policy, a stark difference from the 2020 treasury which relaxed fiscal policy throughout the pandemic.
Sterling fell 0.7% against the Dollar on the back of an increasingly hawkish Fed, however has reversed some losses this morning.EUR
The EU will meet today to discuss curbs on Russian oil imports, in turn forcing Brent crude prices higher. Reports suggest progress is being made in finding alternative energy suppliers for the continent, with a German-Qatari deal made for natural gas supply.
The bloc has entered an era of energy inflation, primarily a result of its climate commitments and fossil fuel dependence, this has created further price pressure, and could lead the ECB to adjust its inflation target.
EURUSD trades 0.44% lower on the week so far. According to reports, the ECB may begin hiking rates late in 2022/early 2023 if the Russian conflict doesn’t substantially depress the EU economy.USD
Powell’s comments on the extent to which the Fed might hike rates triggered a bond sell-off, driving short-dated treasury yields down. The gap between 5-year and 30-year yields narrowed to the smallest since 2007, signalling that tighter monetary policy may hinder economic growth.
Powell disputed claims that the gap between yields is indicating a potential recession, prompting investors to watch the short-term curve which is yet to invert.
The Dollar has rallied following Powell’s comments yesterday, the DXY trades up 0.31%ASIA/PACIFIC
Hong Kong appears to have accepted defeat in implementing a covid-zero policy, rolling back mass testing, and easing of travel restrictions.
A close aide of Japanese PM Kishida, has suggested Japan may have to consider economic stimulus amid rising prices, potentially needing an extra budget.ILS
USDILS trades in the low 3.22s after briefly reaching highs of 3.2360 during the Asian session.Data & Events
ECB – Several speakers
BoE – Cunliffe speaks
UK – Feb Public finances
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