Monday March 21st, 2022

The US$ is flat, oil prices strengthen, while equity markets and US futures are firm amid easing risk-off trades and the US$ steadies. The Ukraine war enters its 4th week, Mariupol refuses the Russian ultimatum to lay down their arms and leave the city. The EU foreign ministers are now considering new sanctions on Russia as some push for an oil embargo. President Biden will be attending the EU, NATO, G7 summits Thursday in Brussels. Today markets will be focused on the Chicago Fed National Activity Index, President Biden speaking with European leaders and then the Fed Chairs Powell’s speech for intraday direction. In other news. Germany says its clinched long-term gas supply deal with Qatar. The EU reviews sustainable food plans as Ukraine war disrupts imports. 10 million people flee their homes in Ukraine says UN agency. ECB President Lagarde said today she expects the ECB & Fed to be out of sync in the foreseeable future, as the war in Ukraine has vastly different effects on their economies. Hong Kong to ease strict covid curbs after business backlash. In the currency markets. Russian RUB falls 5.5% vs US$, the US$ index is steady, and JPY holds near 6-year lows on BOJ’s dovish policy. CNY firms 0.1%, while Asian currencies are down 0.15% on average. Trading currencies are mostly under pressure with CHF up 0.1%, while JPY is flat, NZD & ZAR are down 0.15%, MXN & NOK ease 0.25% and AUD weakens 0.45% vs US$.

Oil prices firms 4% as the EU considers joining the US in a Russian oil embargo and supply concerns increased on weekend after an attack on Saudi oil facilities. C$ opens near its 4-day highs following Friday’s Canadian retail sales which beat expectations rising 3.2% and supported with agriculture & energy futures continuing to remain firm. Intraday with no key economic releases markets will continue to react to Ukraine updates as well as comments from the Fed Chair today. Support holds at 1.2585, if breached look for 1.2502 (2022 lows), while resistance remains at 1.2690.

Euro appears capped on rallies ahead of Fed Chair Powell’s speech and after ECB’s comments. Germany clinches a long-term gas supply deal with Qatar which opens the door to the EU joining the US in putting sanctions on Russian oil. ECB President said she expects the ECB & FED to be out of sync and expected the ECB to keep rates on hold at record lows while the FED is expected to potentially raise rates a further 5 times in 2022. The prospect of diverging interest rates and the impact of Ukraine refugees, increasing EU defense spending and supply chain issues will likely keep the Euro under pressure vs US$ in 2022. Support holds at 1.0980, while resistance remains at 1.1075.

EURGBP firms in early trading as GBP extends its weakness after Thursdays dovish rate hike and concerns over the growing cost of living across the UK. Support holds at .8365 (1.1954) while resistance remains at .8450 (1.1834)

GBP eases domestic pressures and the prospect of rising interest divergence vs the US. The BoE’s dovish rate increase last week highlighted the increasing divergence between the UK & US interest rates going forward in 2022. Domestically, on Sunday the Chancellor of Exchequer Sunak said on Sunday he would help where he could with the current cost-of-living squeeze but warned that the Ukraine crisis and sanctions on Russia would increase the domestic economic problems. Focus will be on Fed Chair’s Powell’s speech today which will be a primary driver for the pound today. Support holds at 1.3080 while Resistance remains at 1.3165.