Tuesday March 1st, 2022

The US$ firms, oil prices strengthen, equity markets & US yields are mixed as market uncertainty continues. Markets continue to respond to news headlines as Russia steps up its aerial campaign in Ukraine and the military convoy approaches Kyiv. The Russian Rub has dropped 30%, holding just below 100 vs US$, Russian interest rate more than doubles to 20%, while further sanctions are expected on Russia. Intraday alongside Ukraine updates markets will focus on German inflation numbers, Canadian GDP and US Manufacturing data for currency market direction. Markets will also be focused on Fed Chairs testimony on Wednesday as uncertainty is building if the Fed will raise 0.5% on March 16th. In other news. EU wants to block seven Russian banks from SWIFT. US President delivers the state of the Union tonight. Nord Stream 2 owner considers insolvency after sanctions halt the pipeline. Italian annual inflation level spikes to 6.2%. Hong Kong prepares for compulsory mass covid testing and a city-wide lockdown and the Polish PM to discuss EU membership for Ukraine with the EU commissioner. In currency markets. Safe-haven currency buying continues with EURCHF falling to new lows below 1.0230, JPY strengthens 0.5% vs Euro and the US$ index strengthens vs a basket of major currencies. CNY is flat, while Asian currencies dip 0.1% vs US$ on average. Trading currencies are mixed with ZAR & CHF dips 0.1%, MXN weakens 0.2%, while NOK Flat, and JPY, AUD & NZD firm 0.2% vs US$.

Oil prices rise over 3% with Brent Crude testing towards US$102pb as oil prices jump as the Ukraine conflict increases concerns over supply disruptions as Russian sanctions outweighs talks of a coordinated global crude stocks release. C$ extended gains vs US$ in early trading as oil prices rally and markets refocus on Wednesday’s BoC rate decision where the bank is still expected to raise rates by a ¼%. Intraday Ukraine updates, oil prices and CAD GDP for direction today. Support resets 1.2634, if breached look for a possible run to 1.2550, while resistance remains at 1.2755.

Euro extends its slide towards 1.1125 as EU yields weaken. German 10-year yields turn negative returning back to March 2020 levels, weighed down by the ECB’s bond purchases and liquidity injections. Under the current geopolitical concerns, the prospect of an EBC rate hike in 2022 diminishes. Markets will remain focused on Ukraine updates, further sanctions and EBC president Lagarde speech for intraday directions. Support remains at 1.1125 while resistance lowers to 1.1230.

EURGBP weakens as German yields fall and concerns over Ukraine continues to weigh on the Euro and the prospect that the ECB will not raise rates in 2022. Support holds at .8300 (1.2048) while resistance remains at .8450 (1.1834)

GBP bounces off intraday lows but looks capped at 1.3440 vs US$. The pound is expected to remain under pressure as Ukraine uncertainties continue to drive investors to safe haven currencies. Domestically Chancellor Sunak is coming under sustained pressured to drop proposed tax increases. Intraday Ukraine updates and US data releases will dictate GBP direction. Support resets to 1.3390, if breached look for a retest of 1.3350, while Resistance holds at 1.3440.