• richard evans

US Dollar continues to rise, GBP stays under pressure

Good morning

The US dollar remains bid, renewed buying in early London trading sees USD making fresh highs against the likes of EUR and GBP, which trade at 1.0620 and 1.2565 respectively, GBP once again suffering a little more as is reflected in EURGBP which now sits at 0.8450 (GBPEUR 1.1835). Still there is talk that the market is overpricing the chance of UK rate rises, in stark contrast to US Fed wherer a string of rate rises are widely expected, together with balance sheet reduction. Lower risk sentiment has seen the traditional safe haven currencies make some ground, CHF trading to 1.0225 against EUR.

Even Yen which for a while looked as though it had lost its safe-haven status made gains against USD, trading as low as 127.00 and EURJPY got down to 135.70 although it has since lost some of those gains, USDHJPY and EURJPY now 127.80 and 135.70 respectively. GBPJPY really hit, one week ago it was at 168.40, it traded as low as 159.65 overnight, now 160.50. BoJ rate announcement due tonight, no major changes expected but it will be interesting to see what they say about the recent yen volatility.

In contrast to other global stocks, China equity prices were positive overnight as Xi talked of the need for higher infrastructure spending. USDCNY fixed 6.5598, almost unchanged from yesterday.

Not a sign of any hope from Ukraine, the Times reports Putin told the UN SecGen that claims of massacres committed by Russian troops has destroyed the hope of a diplomatic solution, with Russia also claiming UK are encouraging Ukraine to use UK weapons on attacks on Russian territory. Now we hear that Russia is turning off gas supplies to Poland and Bulgaria after both nations refused to pay in roubles. Some suggestion Germany will ban Russian oil altogether but it is difficult to see where their supplies would come from if this were the case. Meanwhile, Germany are changing their policy and sending heavy tanks to Ukraine to help the fight against Russia.

Aussie inflation overnight came in well above expectations giving AUD a bit of a push although this mornings US dollar strength has wiped out those gains. Still, RBA will have to take notice and the feeling is we will see a rate rise at their meeting next week.

Finally, interest in our USD purchase idea yesterday suggests many UK firms have been taken by surprise at the rapid GBP decline and still need to buy dollars. Our trade suggestion was well-received, but the key point is how effective our structured USD purchase program is in times of market stress. April positions expire today and those who participate in the program will be buying dollars above 1.3000, some 500 points above spot.

That’s about all for now, enjoy the day, but I fear this recent bout of volatility is not over.

- 12.30 ECBs Lagarde speaks

- 13.30 US wholesale inventories

- 15.00 US pending home sales

- 17.00 ECBs Lagarde speaks

- 23.30 BoCs Macklem, Rogers speak

- 23.45 NZ trade balance

- 00.50 Japan industrial production, retail trade

- 02.30 AUS import, export prices

- 04.00 BoJ rate announcement

- 07.00 BoJ press conference


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