Daily Forex News

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GBP/JPY stays depressed below 155.00 as yields ease on Ukraine fears

GBP/JPY remains sidelined around 154.70 during Thursday’s Asian session, mildly offered after bouncing off a 10-week low the previous day. The cross-currency pair’s latest weakness could be linked to the market’s anxiety ahead of key data/events, as well as a lack of major catalysts. Cautious optimism from an anticipated round of peace talks between Russia and Ukraine battles increasing hopes of a faster rate-hike trajectory by the Fed to test the market sentiment of late.

A Russian negotiator was quoted to share the news of a probable round of diplomatic talks on Thursday. On the same line, Interfax also mentioned, “A potential ceasefire will be discussed in upcoming talks with the Ukrainian delegation.” It’s worth noting that a jump in the probabilities of a 0.50% rate hike in the March Fed meeting, per CME’s Fed Watch Tool, also challenges the market’s optimism. On the same line were the US inflation expectations that rose to a 15-week high, as measured by the 10-year breakeven inflation rate per the St. Louis Federal Reserve (FRED) data.

Elsewhere, global rating agencies like Moody’s and Fitch cut Russia’s ratings and contribute to the offbeat sentiment. At home, the Daily Express quotes data showing a jump in the EU nationals in the UK to shrug off Brexit criticism. Further, UK PM Boris Johnson spoke to Ukrainian President Volodymyr Zelenskiy and said, he will publish ‘full list of all those associated with the Putin regime’ per The Guardian. Additionally, Bank of England (BOE) policymakers, including Silvana Tenreyro and Jon Cunliffe, cited economic risks emanating from Russia’s invasion of Ukraine.

On the same line, Bank of Japan (BOJ) monetary policy board member Junko Nagaya said in a statement on Thursday, “Japan’s economic outlook remains highly uncertain from January onward.” Amid these plays, S&P 500 Futures print mild losses whereas the US 10-year Treasury yields also drop 1.2 basis points (bps) to 1.85% by the press time.

Moving on, the UK’s final reading of Services PMI for February, expected to confirm 60.8 figure, will decorate the calendar. However, major attention should be given to geopolitical headlines for clear directions.

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Gold is surging and breaking records. $2,000/oz

At the start of the week, the price of gold in fast markets has just surpassed $2,000 per ounce. The catalyst is oil, as well as concerns about global stagflation. Oil prices have increased by 10% on Monday as a result of the threat of a ban on Russian products in the United States and Europe. Delays are also occurring in Iranian negotiations. Brent was quoted at $130.84, up $12.73, while US crude was up $9.92 to $125.60. At the time of writing, it is reported that US House Speaker Nancy Pelosi is considering legislation that would prohibit Russia from importing oil. This was a topic that roiled markets right away.

Pelosi stated last Thursday that she supports a ban on Russian oil imports into the United States. Biden has been hesitant to restrict Russian oil shipments to the US or impose energy sanctions, despite the fact that prices are already hitting US citizens’ pockets. However, the sanction has already received widespread support from Republicans and an increasing number of Democrats.

Commodity prices in general have had their best start to a year since 1915. Among the many movers last week, nickel increased by 19%, aluminium by 15%, zinc by 12%, and copper by 8%, while wheat futures increased by 60% and corn by 15%. This makes this week’s US Consumer Price Index a critical event for markets, with an annual growth rate of 7.9 percent and a core measure of 6.4 percent expected ahead of the European Central Bank meeting this week and the Federal Reserve meeting next week. The divergence between the two banks is fueling the bid for the dollar, which is competing with the price of gold as they both soar to new heights.

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With peace talks on the horizon, the XAU/USD remains below $2,000 per ounce

On Wednesday, gold suffered greatly as risk sentiment improved. After reaching a 19-month high at the start of the week, the precious metal fell back below $2,000 per ounce. Spot gold fell 3.3 percent to $1,976 per ounce, capping a rally that had taken it close to the all-time high set in August 2020. Gold futures in the United States fell 2.7 percent to $1,988.20. Profit-taking, as well as a sharp drop in oil prices, fueled the reversal, allowing buyers to scoop up bargains in the stock markets on stocks that had previously been hammered by concerns about Russian sanctions.

On Wednesday, a Russian airstrike severely damaged a children’s hospital in the besieged Ukrainian port city of Mariupol. However, risk sentiment improved as oil prices fell sharply after the United Arab Emirates said it would support increasing output as an OPEC member. Brent oil dropped from $131.50bbls to $105.91bbls. The price had reached a high of $138.03bbls at the start of the week in a market that was in disarray due to supply disruptions caused by sanctions imposed on Russia as a result of the conflict.

The price of oil is critical for gold. Oil’s rally has been a major source of concern as markets assess whether the global economy will face a stagflationary or inflationary shock. “The conflict in Ukraine has serious and obvious implications for commodity prices. Will the implications for inflation, however, be more long-lasting than those for growth? Certainly, global central banks are concerned about one particular channel of self-reinforcing inflation — inflation expectations could be de-anchored if the shock permeates the world’s psyche,” analysts at TD Securities explained.

“While the direct implications of the conflict on growth are more limited in the US, indirect implications may be more relevant as ongoing disruptions to supply chains may have a spillover effect, while inflation is also likely to act as a tax on consumers,” the analysts added. “If the shock depresses consumer sentiment at the same time, the Fed will have to walk a tightrope between its unemployment and inflation targets.” As a result, the market has concluded that the Fed will remain nimble in order to avoid tipping the US economy into a recession for the time being, but the subsequent rate path and the path for quantitative tightening are less clear.”

“In this context, gold bugs are more likely to profit from a subsequent increase in central bank demand for gold, having observed the events unfold as potential vulnerabilities for national accounts.” ” Gold’s price has fallen to a familiar area of resistance, which is now acting as support. While the drop was unexpected in terms of magnitude on a single day, it did fall from a previously designated significant level.

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EUR/USD seeks to break a four-week downtrend near 1.1000, with a focus on US data and Ukraine

The EUR/USD is licking its wounds after the ECB while making its way to 1.1000, up 0.15 percent intraday during the mid-Asian session on Friday. The pair’s recent movements could be attributed to the market’s uncertainty about the key risk catalysts, as well as a USD pullback. Nonetheless, the major currency pair is on track to end its four-week losing streak.

The US Senate’s passage of a $13.6 billion aid package to Ukraine and a $1.5 trillion bill to avoid a government shutdown could magnify Western aid to Kyiv, as seen in today’s United Nations (UN) Security Council, which weighs on EUR/USD prices. Concerns about a new surge in China’s covid cases, as well as fears about Russia’s invasion of Ukraine, are all on the same page. The quote was under downward pressure as a result of this. The previous day’s US inflation data and subsequent hopes for faster Fed rate hikes may also have contributed to the pair’s weakness.

Alternatively, uncertainty over Russia’s military position in Ukraine, as well as a lack of major data/events in Asia, appears to limit EUR/USD downside. Having said that, reports of a Russian military attack on a Kharkiv institute containing an experimental nuclear reactor initially shook the market before the news of no negatives quelled fears. Similarly, reports that Moscow’s forces are gradually dispersing and may be retreating favoured the optimists prior to the US Satellite company Maxar’s update indicating more troops being redeployed.

Among these bets, the S&P 500 Futures fell 0.5 percent on the day, while US 10-year Treasury yields fell 4.4 basis points (bps) to 1.965 percent by press time. Furthermore, the US Dollar Index (DXY) remains undecided around 98.50 but remains determined to reverse the previous four-week uptrend.

It’s worth noting that the European Central Bank (ECB) cited inflationary challenges while releasing details on faster Quantitative Tapering (QT) the day before. Euro traders, on the other hand, focused on the eurozone’s currency’s downwardly revised growth forecasts and upwardly revised inflation expectations. “The ECB’s statement, which left the door open to raising interest rates before the end of 2022 because soaring inflation outweighs concerns about the fallout from Russia’s invasion of Ukraine, “The euro rose briefly before market sentiment turned negative,” according to Reuters.

The risk-off mood, on the other hand, combined with new 40-year high US Consumer Price Index (CPI) prints of 7.9 percent YoY to propel the US Dollar the previous day. It should be noted that the CME’s FedWatch Tool shows 94 percent probability of a rate hike in March at the latest. Looking ahead, the UN meeting and updates from Ukraine may keep the driver’s seat, while the US Michigan Consumer Sentiment Index for March, which is expected to be 61.3 versus 62.8, will also be important to watch for new EUR/USD directions.

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The AUD/USD is expected to fall further towards 0.7200 as China and the Fed join the Ukraine-Russia crisis

As market sentiment deteriorates ahead of Monday’s European session, the AUD/USD reverts to an intraday low around 0.7250, down 0.48 percent on the day. The risk barometer validates the market’s recent pessimism, as well as its apprehension ahead of this week’s key Federal Open Market Committee meeting (FOMC).
The improved progress in Ukraine-Russia peace talks was not enough to entice AUD/USD buyers, as the latest Russian shelling and demands for Kyiv to back down, as well as Ukraine’s push for more sanctions against Moscow, did. On the same vein, International Monetary Fund (IMF) Managing Director Kristalina Georgieva stated on CBS’s “Face the Nation” programme that Russia may default on its debts as a result of unprecedented sanctions over its invasion of Ukraine, but this would not trigger a default.

In other news, China has reported the highest daily covid infections since May 2020 and has imposed strict lockdowns in two states, bringing back the virus woes and weighing on the AUD/USD. The strength of US Treasury yields is also a challenge to the quote, as the 5-year bond coupon renews at an all-time high above 2.0 percent amid record inflation expectations, according to the 10-year breakeven inflation rate from the St. Louis Federal Reserve (FRED) data.

Among these bets, the S&P 500 Futures and the ASX 200 both pared early Asian session gains. Furthermore, Chinese stocks are falling, despite market expectations for a rate cut by the People’s Bank of China (PBOC). As a result, risk aversion may continue to weigh on AUD/USD prices until commodities regain upside momentum, which is less likely given China’s challenges.

Nonetheless, a light calendar and anxiety ahead of this week’s FOMC meeting may allow the quote to recover some of its recent losses if the Australian jobs report matches upbeat forecasts and the RBA Minutes confirm Governor Philip Lowe’s recent comments supporting a rate hike by the end of 2022

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The dollar is nearing a five-year high against the yen ahead of the Fed, while the Australian dollar is weak due to China concerns

On Wednesday, the dollar traded near a five-year high against the yen as investors awaited a Federal Reserve policy decision against the backdrop of the Ukraine war and China’s surging COVID-19 cases. Treasury yields jumped ahead of the Federal Open Market Committee decision, boosting the dollar against its Japanese counterpart, with traders fully pricing in the first interest rate hike in three years and giving a 13 percent chance of a half-point increase.

The dollar was also near its highest level this month against the Australian dollar, as commodity prices fell from multi-year highs, as markets remained hopeful that Russia-Ukraine talks would lead to an end to hostilities. Australia’s currency was also under pressure as top trade destination China saw new COVID cases more than double to a two-year high on Tuesday, raising concerns about the rising economic costs of the disease’s zero-tolerance policies.

Meanwhile, the euro has resumed its recovery from a near-22-month low earlier this month. This contributed to the dollar index remaining stable around 99.0, after reaching a high of 99.415 at the start of last week. “Whether forlorn or otherwise, there does seem to be some enduring optimism (coming from) the fact that Russia and Ukraine are still talking,” said Ray Attrill, head of FX strategy at National Australia Bank, helping the euro to stabilize.

In terms of the greenback, “the bigger question will be that there’s a lot of historical evidence that the dollar peaks as soon as the Fed begins the tightening cycle, so there’s a lot of interest in whether what the Fed does turns out to be something of a watershed in terms of a peak,” Attrill said, with the dollar index peaking around 100. The dollar index was last at 98.880, slightly lower than on Tuesday. The euro rose 0.14 percent to $1.09695, up from a low of $1.08060 on March 7. The Australian dollar rose 0.08 percent to $0.72015 after falling to $0.71650 in the previous session for the first time since February 28.

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With all eyes on the Xi-Biden negotiations, the AUD/USD remains under pressure approaching 0.7350

The AUD/USD broke a three-day rally from a monthly low during Friday’s Asian session, and is now trading at the intraday low of 0.7370. In doing so, the Aussie pair reflects the market’s trepidation ahead of a crucial phone conference between US President Joe Biden and his Chinese counterpart Xi Jinping, which will address a variety of topics, including the Ukraine-Russia situation. China’s Foreign Ministry acknowledged ahead of the meeting that China and Russia met on March 17 to discuss security cooperation. It’s worth mentioning that Beijing has repeatedly refuted US assertions that it is ready to assist Moscow in its conflict with Ukraine.

On a different page, Reuters reported that China recorded 2,416 new confirmed coronavirus cases on March 17, up from 1,317 the day before, according to the country’s national health authorities. ” It’s worth mentioning that COVID-19 daily infections have been decreasing in the previous two days after reaching an all-time high.

On the contrary, news of industry output restarting in five Shenzen districts keep buyers optimistic. In other news, Turkey is attempting to establish contact between Russian President Vladimir Putin and his Ukrainian counterpart Volodymyr Zelenskyy, but has received no confirmation. Fears of a Russian default add to the risk-off mindset.

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XAU/USD maintains small advances near $1,925, but lacks follow-through

Gold crept up in the early hours of Monday trade, but there was little follow-through purchasing or strong positive confidence. There appears to be no end in sight to Ukraine’s prolonged conflict, which has rejected Russia’s offers to hand up the port city of Mariupol. The deteriorating geopolitical environment put investors on edge, lending some support to the safe-haven precious metal. However, the advent of some US dollar buying worked as a headwind for the commodity priced in US dollars.

The fact that the Fed signalled last week that it may hike rates at all six remaining meetings in 2022 continues to bolster the buck. This, together with increased hawkish statements from important FOMC members and higher US Treasury bond rates, supported the dollar while limiting gains for non-yielding yellow gold. Nonetheless, the metal has managed to keep its head above the $1,920 level so far, as market players await Fed Chair Jerome Powell’s scheduled address later in the US session.

Traders will take cues from new developments in the Russia-Ukraine storey, which will play a significant role in determining market risk sentiment. Aside from that, the USD price dynamics should offer some push to gold in the absence of any market changing economic releases from the US. As earlier update Gold (XAU/USD) is licking its wounds at $1,928, up 0.30 percent intraday during the Asian session on Monday. The yellow gold suffered its largest weekly drop since June 2021, as market confidence strengthened during the previous week, impacting on the bullion’s safe-haven demand. However, Ukraine’s rejection of Russia’s capitulation demand in Mariupol has reignited risk aversion.

In addition to Kyiv’s willingness to fight in Mariupol, increased shelling in Ukraine by Russian soldiers reflects the bleak situation. The Chinese Envoy recently expressed willingness to de-escalate the conflict in Ukraine, but markets remain sceptical, as the past week’s discussion between US President Joe Biden and his Chinese counterpart Xi Jinping failed to deliver any important specifics on the critical topic. On the contrary, the debate over Taiwan heightened Sino-American tensions, reviving gold’s safe-haven demand. Other factors influencing market mood include rising covid numbers in China and the suspension of trade in Hong Kong by struggling real estate giant Evergrande. It’s worth mentioning that the People’s Bank of China (PBOC) kept benchmark interest rates steady, as expected by the market. According to the most recent policy adjustment, the one-year Loan Prime Rate (LPR) stayed steady at 3.7 percent, while the five-year equivalent remained fixed at 4.6 percent. Against this backdrop, the S&P 500 Futures falls 0.28 percent intraday, while Asia-Pacific stocks trade neutral due to a vacation in Japan and a light calendar elsewhere.

In the near future, US President Joe Biden will speak with the leaders of France, Germany, Italy, and the United Kingdom. Given the new escalation in the Ukraine-Russia conflict, lawmakers may put additional pressure on Moscow, which might boost the XAU/USD. A speech by Fed Chair Jerome Powell is also expected to influence gold prices for the day. If Powell continues to see a negative risk to inflation in the future, the US dollar’s weakening may contribute to the metal’s recent gains.

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The EUR/USD is once again under pressure as Asia takes over the baton

EUR/USD is down 0.13 percent, having fallen from a top of 1.1013 to a low of 1.0982 thus far. The US dollar rose on Wednesday as oil prices rose again, with US President Joe Biden set to announce more sanctions against Russia with European leaders during his trip to Europe. Traders are anticipating Biden’s arrival in Brussels later Wednesday to meet with NATO and European leaders in an emergency conference at the headquarters of the Western military alliance. According to Reuters, the US package would include sanctions aimed at Russian members of parliament.

Stocks in the United States plummeted as a result of the news, but treasuries rebounded from historic losses ahead of stricter monetary policy to battle inflation. The S&P 500 fell 1.2 percent, driven by financial sector losses, as the 10-year Treasury yield fell to 2.30 percent after touching highs not seen since mid-2019. Traders are piling into bonds as Federal Reserve officials indicate they are likely to hike interest rates rapidly to manage inflation, and the Ukraine crisis has drove commodity prices up 26 percent this year.

Meanwhile, Loretta Mester, a member of the Federal Open Market Committee, has advocated for 50bp rate rises this year, citing the economy’s surplus demand. She doubts rate hikes will cause a recession and that unwinding the balance sheet will help reduce distortions in the yield curve. President of the Federal Reserve Bank of St. Louis, James Bullard, has maintained his hawkish tone.

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As the Ukraine war and inflation troubles combine stable yields, the XAU/USD is bracing for a $2,000 price

For the third day in a row, gold (XAU/USD) has been in the lead, with bids at $1,963 at press time in Friday’s Asian session. The previous day, amid rising anxiety over the Ukraine-Russia confrontation, the yellow metal hit a new high in almost two weeks. The metal’s recent gain, on the other hand, might be connected to a drop in the value of the US dollar. By press time, the US Dollar Index (DXY) had fallen 0.30 percent intraday to 98.50, halting a two-day upswing. The dollar’s recent fall might be attributed to slow Asian rates and market inflation worries, as well as hesitation over Ukraine’s conflict with Russia.

It’s worth remembering that most global officials, not just the Fed, have recently raised concerns about inflation, which has fueled gold’s safe-haven demand. Japan’s central bankers were the most recent to join the group. The possibility of a 0.50 percent rate rise by the US Federal Reserve (Fed) and talk about Quantitative Tightening are also worth noting (QT).

“Russia will emerge from the Ukraine crisis weakened militarily and diplomatically,” a senior US official was reported by Reuters as saying. On the same topic, Reuters published an article claiming that Russia’s precision missiles are inaccurate and that there has been a shortage of them in recent days. Australia and Japan have recently joined the West in punishing Russia, heightening concerns over the situation.

On Thursday, US Vice President Joe Biden pressed European leaders, the Group of Seven (G7), and NATO members to impose more sanctions on Russia for its invasion of Ukraine. While his NATO allies were able to set up combat guards for four Ukrainian cities and denounced Beijing’s connections with Moscow, the rest of the world mostly avoided substantial sanctions against Russia. Despite rising inflation worries and geopolitical difficulties stemming from the Russia-Ukraine conflict, the new measures provide a glimmer of hope for a good turn in the peace negotiations between Moscow and Kyiv, prompting gold dealers to remain cautious.