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  • richard evans

US dollar higher as markets look for more 50bps rate rises

Good morning

Option expiries back to 3pm London time, key US data releases back to 1.30pm/3.00pm london time after UK clock change this weekend.

We have seen a fairly volatile start to the week after a degree of relative calm for much of last week. US dollar is higher against most majors as markets price in more 50bps rate rises by the Fed with some research houses seeing potential for three or even four 50bps rises beginning in May. Fed could also begin its balance sheet reduction as early as the May meeting. Yen the main loser. Indeed yen is the main talking point this morning as further weakness hits the currency. USDJPY is up nearly 1.5% at 123.75, dragging yen crosses higher as well, EURJPY 135.50 as I type. Comments from Japanese officials over the weekend say BoJ need to continue with huge monetary stimulus, while BoJ itself announced it would buy JGBs in unlimited amounts as part of its yield curve controls.

The higher US dollar sees GBPUSD back down to 1.3150, EURUSD to 1.1950 leaving EURGBP around 0.8330 (GBPEUR 1.2005).

Ukraine has suggested it could discuss neutrality, although only if Russia withdraws its troops, something I cannot see happening. I do think Russia seem to have changed their target though, I expect they would be happy to hold East Ukraine but also an area to the South to link Russia with the Crimea region. Talks between Ukraine and Russia are set to continue today in Turkey. We’ve all seen Europe and US backtrack from Bidens comments, he said Putin cannot remain in power, leading to the West having to confirm they are not looking for a regime change in Russia.

A large part of Shanghai has been locked down as China continue to battle with rising Covid infections as Omicron takes on Chinas zero Covid policy. The numbers are still relatively low, in the low thousands, but they are increasing and as we know only too well, this can spiral out of control very quickly. We had over one million new cases last week in the UK, but severe illness and hospitalisations remain low(ish). I’d be surprised if there was anyone who hadn’t had it recently, or at least known of several people who have had it recently. Fortunately most of these cases do not lead to severe illness or hospitalisations.

The weather was pretty decent over the weekend and indeed looks, although the forecast suggests the warmth and sunshine is not here to stay. Thursday looks as though it could bring lower temperatures and even sleet. I hope you enjoyed it while it lasted! Speaking of enjoying the weekend, I am very pleased indeed to report that my U15s beat our local rivals 3-1 in the league. Our opponents had been on a good run and were top of the league, having played six more matches than us, it was important for us to get some more points on the board as we struggle to catch up with our fixtures. We remain unbeaten in the league but still have 14 matches to play!

- 11.00 BoEs Bailey speaks

- 13.30 US wholsesale inventories

- 00.30 Japan unemployment

- 00.50 BoJ summary of opinions

- 01.30 AUS retail sales

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