Thursday March 10th, 2022

The US$ & oil prices firm, equity markets fall, while US yields are mixed as risk sentiment eases. Russia-Ukraine cease-fire talks in Turkey failed to make progress, while Ukraine Aid package passes house as lawmakers say more needed and US abandons plans to transfer Polish MiG-29s to Kyiv. Market risk sentiment shifted following no diplomatic breakthrough as Russia-Ukraine enters its 3rd week of conflict. Germany & France both call on President Putin for an immediate cease fire. Intraday US CPI is forecast to have hit the quickest pace since 1982 in Feb, while the ECB meets to announce its Interest Rate Decision. In other news. Iran says unreasonable US offers hurt efforts to reach nuclear deal. Swedish PM vows to raise military sending substantially. Russia bans exports of turbines, vehicles and certain types of timber will be restricted. The UK halts Chelsea FC sale after the Abramovich assets are frozen. In the currency markets. Russian Rub firms 9.5% but remains down 58% YTD.  Safe-haven US$ rebounds vs a basket of major currencies after Russia-Ukraine talks fail. CNY is flat, while Asian currencies weaken 0.15% on average vs US$. Trading currencies come under pressure with safe-haven CHF up 0.1%, while JPY, AUD & NZD are down 0.1%, MXN falls 0.6% and ZAR & NOK tumble 0.8% vs US$.

Oil prices bounce after cease-fire talks fail and ongoing tight supply concerns sees oil prices rise 5% in early trading. C$ dips in early trading but remains stronger vs its European counterparts after Russia/Ukraine talks fail to deliver a ceasefire. Intraday US inflation report, Ukraine/Russia updates will continue to drive the loonie in the short term. Investors will be focused on Cad unemployment on Friday, our bias remains to sell US$ on rallies. Support holds at 1.2750, if breached look for 1.2635 next while resistance holds at 1.2880.

Euro slips after Turkish ceasefire talks fail. Markets remain tied to the daily updates on the status of the Russia/Ukraine conflict, any prospect of de-escalation supports Euro and vise-versa on any escalation. Intraday investor focus will focus on the ECB interest rate decision and the related statement for signs of interest rate direction. Also on the docket is the key US inflation report which is expected to spike to 7.9% vs 7.5%. Our bias continues to be bearish Euro medium term as US – UK are expected to raise rates and a prolonged conflict in Ukraine will add further pressure to Euro. Support rises to 1.0970, while resistance shifts to 1.080.

EURGBP slips after Wednesdays significant rally. Focus shifts to Thursday’s US CPI – ECB Rate Decision. Support resets at .8250 (1.2120) while resistance rises to .8425 (1.1869)

GBP volatility continues to be driven by the Russia-Ukraine updates. The pound slid back towards 1.3100 as the safe-haven US$ rebounds and the dollar is likely to extend gains if US inflation levels post 7.9% yoy. The US$ remains in the driving seat and the pound in the short term will respond to news headlines going into BoE rate decision in June. Support holds at 1.3090 while Resistance remains 1.3190.