Tuesday March 15th, 2022

The US$ is lower, oil prices tumble, while equity markets & US yields also decline as risk sentiment is dented. The US$ weakens for a 3rd day, oil tumbles to US$100pb, European shares fall 1% as the combination rising covid cases in China, the ongoing Ukraine war and concerns over the Fed raising rates on Wednesday shakes investors’ confidence. The EU approves a new round of Russia sanctions targeting energy, steel, and the defense sector. Intraday the Russia-Ukraine peace talks, US PPI report and ECB President Lagarde speech will be in focus. In other news. The EU ZEW Survey – Economic sentiment tumbled to -38.7 from expected +49.3 in March in response to the war in Ukraine. Czech, Polish & Slovenian leaders head to Kyiv in a trip symbolic of Ukrainian success so far. The US held 7-hours of ‘intense’ talks with China in Rome amid Russia’s war in Ukraine. Equity markets in Europe weaken on relentless selling in China stocks revives memories of 2008 crash. China’s soaring covid case load hits 2-year highs, raising concerns about rising economic costs of China’s containment measures. The EU bans top credit rating agencies rating Russia and Russian firms. In the currency markets. Euro firms on peace talk optimism, CNY drops to 3-month lows on covid concerns, JPY rebounds from 5-year lows. CNY down 0.2%, while Asian currencies are flat on average vs US$. Trading currencies are consolidating with ZAR down 0.1%, CHF flat, while AUD & NZD up 0.1%, JPY, NOK & MXN firm 0.2% vs US$.

Oil prices tumbles over 5% to 2-week lows as ceasefire talks between Russia & Ukraine eased concerns of further supply disruptions and covid restrictions in China decreasing demand. C$ eases to the higher end of its recent 1.2750-1.2900 range as commodity prices ease and investors reduce their bullish bets to 7-week lows. Markets will be focusing on CAD inflation numbers on Wednesday which will help guide expectations on the BoC’s next step and the FOMC rate decision. Support holds at 1.2730, while resistance holds at 1.2880.

Euro holds at 1.1000 despite weak ZEW economic sentiment. The war in the Ukraine is raising concerns of a recession across Europe is becoming more likely. Monday saw industrial production in the Eurozone contract by 1.3% on a yearly basis, while today both German & EU ZEW economic summit plummeted to -38.7 in March from +48.6 in January. Focus will be on ECB President Lagarde’s speech later in the day for direction from the central bank. The Euro is finding support as optimism is high going into today’s Ukraine-Russia peace talks. sits at 1.0950, while resistance shifts to 1.1035

EURGBP continues to edge higher as market optimism for the Ukraine/Russia peace talks helps drive the Euro despite weak domestic economic results. Support holds at .8365 (1.1954) while resistance remains at .8450 (1.1834)

GBP steadies inside 1.3000-1.3050 range as on strong employment numbers and as markets await the Fed and BoE rate decisions. The UK unemployment levels fell below pre-pandemic rates at 3.9% from 4.1% in January. Markets will be focused on the BoE who is expected to raise interest rates for a 3rd time in 2022 at Thursday’s Bank meeting. Intraday updates on the Ukraine peace talks and the US PPI reports will help provide intraday direction. Support holds at 1.2980 while Resistance remains 1.3190.