Well, that quarter went well.....
Well here we are at the end of Q1 2022. We had started the year with some optimism, particularly as Omicron hadn’t been as severe as feared and it looked as though we were emerging from the worst of the Covid pandemic. Brexit hadn’t been the utter disaster many warned about, GBP was on the rise and life was returning to normal. But from one crisis to another, Russia invaded Ukraine in a move many feared, but many believed would never happen.
Now we are waiting to see whether Russian suggestions of withdrawals will lead to some peace or whether it just means a change in targets and methods. So far there seems to have been no let-up in the bombardments. There are some suggestions that Putin’s advisers are not actually giving him the full truth about Russia’s military successes and failures, the fear is that if he is not fully informed, the decisions he then makes will be affected. Regardless, Mariupol remains a key target. Russia have announced a ceasefire to allow civilians to leave, I presume this then leads to the utter destruction of the city and Russian occupation.
The crisis to face us in the UK is the energy prices, not totally to be blamed on Russia but their invasion of Ukraine certainly hasn’t helped. Tomorrow sees domestic energy price cap rise over 50%, leading to much higher bills. The hope is the weather will turn warmer from here, however as I type I look out of the window and see snowflakes in the air.
Europe also hit by the higher energy prices and their reliance on Russian energy. Germany and Austria are potentially looking at rationing gas usage. However Russia will still find markets for their oil and gas, India and China both still seem willing to access Russian energy supplies, India in particular have been warned by US that any significant increase in imports from Russia could be seen as breaking sanctions.
Oil prices have fallen, helped by Biden saying US will release more oil from reserves, while OPEC meet this afternoon and it is hoped they will announce an increase in production.
UK GDP this morning was better than expected with Q4 at 1.3% and YoY at 6.6%. GBP did find some support as a result with GBPUSD trading up from 1.3110 to almost 1.3150, broadly in the middle of the range we have seen for much of March. The GDP number also stopped further GBP declines against EUR for a while, EURGBP had been to 0.8510 (GBPEUR 1.1750), the lowest GBP levels this year to date, we currently sit 0.8490 (1.1780). GBP has fallen some 2.5% in the past week or so against the single currency, a move that really seems to have come a little out of nothing. EURUSD remains around 1.1150, but I’m not convinced it can hold those recent gains.
A reasonable day ahead in terms of data and speeches, tomorrow brings the latest US employment data which as ever will be closely watched. In the meantime I’ll be closely watching out of the window to see if the snow is settling.
- 08.55 German unemployment
- 09.00 ECBs Lane speaks
- 10.00 EU unemployment
- 11.00 ECBs de Guindos speaks
- 13.00 OPEC meeting
- 13.30 US personal income, spending, initial jobless claims
- 13.30 CAD GDP
- 14.00 Feds Williams speaks
- 14.45 US Chicago PMI
- 00.50 Japan Tankan survey
- 02.45 China caixin manufacturing PMI