Collinson FX: Collinson FX: March 15 - European markets positive as ceasefire hopes grow
by Collinson FX 14 Mar 2022 05:20 PDT
15 March 2022
29ers - Oceanbridge NZL Sailing Regatta - Wakatere BC April 11, 2021 © Richard Gladwell / Sail-World.com / nz
European markets opened the week on a positive note, as hopes of a ceasefire in the Ukraine grew, with another meeting of negotiators taking place.
The hot commodity market saw some cooling, as prices settled and bond yields headed north. The US 10 Year Bond surged to 2.12%, ahead of the key FOMC meeting, this week. The Fed are expected to raise rates by 25 basis points, which should be the first step of many to come, considering the rampant inflation savaging the US economy. The Japanese Yen is suffering badly, trading up to 118.00, as the Bank of Japan are way behind on the yield curve moves. The Japanese Central Bank is unlikely to move on interest rates this year, as inflation remains under control, thus driving interest rate differentials wider.
Commodity prices were settling and this pulled the carpet on the associated currencies, with the AUD crashing to 0.7200, while the NZD fell back to 0.6750. Extreme volatility remains a feature of global markets, while raging inflation forces Central Banks to raise the cost of borrowing. The sanctions will devastate European and US markets, due to the impact of energy and agriculture supply to Europe and the World. These will become more evident as the war continues on.
Markets will closely watch the Fed and the Bank of England for any surprises.
Collinson FX: March 14 - US hits 40yr inflation high
Markets closed lower Friday, to close out a week of losses, on equity markets. The sanctions imposed on Russia are impacting global markets hard. The repercussions of a Russian response to sanctions could be crippling for Europe, as they have a heavy dependency on Russian energy and agriculture. This will drive already rampant inflation even higher. US CPI came in at 7.9%, a new record high, for the last forty years. This can only deteriorate further. The EUR has fallen to 1.0900, while the GBP has slipped to 1.3035, ahead of the Bank of England Rate Decision this coming week.
Commodity currencies have suffered once again, with the AUD falling below 0.7300, while the NZD below 0.6800. The Fed meets this coming week and they have indicated they will raise rates by 25 basis points. A failure to act will stimulate equities but further antagonise spiralling inflation. The Bank of Japan will also announce their latest rate decision, but their inflation issues are nowhere near as pressing
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