Weekly FX Market Recap: March 21 – 25

The Japanese yen was the big mover in forex this week as it plummeted against the majors after dovish comments from Bank of Japan officials.

While the yen was in free fall, it seems that most major markets were up, likely on net positive economic survey data showing that economic growth is still alive at the moment in many areas, despite an environment of extremely high prices and a war in Ukraine.

Notable News & Economic Updates:

Powell says ‘inflation is much too high’ and the Fed will take ‘necessary steps’ to address

Bank of Japan officials renewed powerful easing pledge after hawkish Fed signal

ECB President Lagarde does not see elements of stagnation now

Fed officials nod to big rate hikes to fight ‘inflation, inflation, inflation’

UK inflation hits fresh multi-decade high of 6.2% y/y in February vs. 5.5% y/y in January

Flash US manufacturing PMI at 58.5 in March vs. 57.3 in Feb; a 6-month high – S&P Global

U.S. to sanction over 300 Russian elites and block Russian central bank gold

Putin wants ‘unfriendly’ countries to pay for Russian gas in roubles; may allow ‘friendly’ countries to pay in bitcoin

Crude prices surged on Friday off of reports of a projectile strike on an Aramco site in Saudi Arabia

Intermarket Weekly Recap

It was a very interesting week in the financial markets as almost every asset class up this week.

Bond yields were big movers to the upside as the markets priced in hawkish commentary from Fed Chair Powell this week. On Monday, Powell said that the Fed was ready to raise rates faster if needed, which the market took as rising odds we will see 50 bps hikes in the next few meetings.  The 10-year U.S. Treasury yield hit 2.50% on Friday, a rate not seen since May 2019.

Oil also saw a strong bid right from the get go, likely pricing falling odds of a ceasefire between Ukraine and Russia, after Ukraine rejected demands from Russia to lay down weapons in Marlupol on Monday.

Oil headlines were actually pretty busy with speculation that the European Union may ban Russian oil,  as well as reports of Yemen Houthis attacking Saudi energy facilities.

And on Wednesday, the latest oil inventory data showed a draw of 4.3M barrels from stockpiles. WTI crude prices peaked out just under the $117.00 handle before fading back on Thursday.

Crypto assets were on the upswing this week, likely on a few headlines arguably bullish for the king of crypto, bitcoin. On Monday, it looks like recent news that the team behind the Terra blockchain project will be buying up to $10B in bitcoin may be starting to price in.

Terra blockchain is the home of the LUNA token and the US Terra stablecoin (UST), the fastest growing U.S. dollar pegged stablecoin at the moment. The plan is for the bitcoin to be held as an emergency reserve to protect UST from depeg risk during extremely volatile environments.

We also got news that  the world’s largest hedge fund, Bridgewater Associates, would be investing in crypto directly, and later in the week, Exxon hit the wires with news of looking into using excess gas to mine bitcoin. Finally, bullish sentiment may have come after news that the European Union’s MiCA Bill will move forward without the ban on proof-of-work crypto (like bitcoin).

In the FX space, JPY was arguably the most volatile major currency, after traders went into hard sell mode starting on Tuesday. This sentiment was likely a reaction to comments from BOJ Governor Kuroda who re-affirmed the BOJ’s commitment to keeping monetary policy easy.

This sentiment is contradictory to other major central banks, who have already hike interest rates and signaled more interest rate hikes to come this year.

The big winners appear to be the comdolls once again. Rising commodity prices and rate hike expectations have supported the comdolls well this year, and this week was no different with the Bloomberg Commodity Index rising over 3.00% this week showing the strong demand for the sector continues.

Also, it seems positive risk sentiment vibes may have been on display this week to lift the comdolls, likely stemming from positive flash sentiment survey data, as well as

USD Pairs

Powell says Fed is ready to rasise rates faster if needed; Fed’s Bostic sees 6 rate hikes this year, war risks

Richmond Fed Manufacturing Index For March 13 Vs 1 Prior

Bullard Says ‘Faster Is Better’ for Fed in Rate-Hike Strategy

U.S. new home sales fell 2.0% m/m in February; January revised down to 788K homes sold from 801K

U.S. durable goods fell -2.2% in February

U.S. Weekly jobless claims fell to 187K, the lowest since September 1969

Fed Evans says he’s open to 50 bps interest rate hike

U.S. Pending home sales fall -4.1% in February

U.S. consumer sentiment for March was revised down 59.4 vs. 59.7 prelim

GBP Pairs

U.K. House Price Index in March 2022: the average price of property coming to market jumps by 1.7% to £354,564

UK public borrowing higher at 13.1B GBP vs. 8.1B GBP expected in February

UK inflation hits fresh multi-decade high of 6.2% y/y in February vs. 5.5% y/y in January

Flash UK Manufacturing PMI(4) at 55.5 (Feb: 58.0). 13-month low

U.K. GfK consumer climate index down from -26 to -31 vs. -30 forecast

U.K. retail sales fell by 0.3% vs. projected 0.6% increase, previous 1.9% gain

EUR Pairs

Germans face higher inflation, weaker growth from Ukraine war – Bundesbank

Euro zone not facing stagflation risk: ECB’s de Guindos

Current account recorded €23B surplus in January 2022, unchanged m/m

Eurozone consumer confidence falls to -18.7 in March from -8.8 in Feb.

Flash Eurozone Manufacturing PMI at 57.0 in Mar. vs. 58.2 in Feb.

German Ifo business climate index fell to 90.8 in March vs. 98.5 in February

ECB to weigh more bond buying if war crashes economy -Schnabel

CHF Pairs

Swiss National Bank keeps interest rate at -0.75% despite more expensive franc

CAD Pairs

Canadian Industrial Product Price Index rose 3.1% m/m in February; raw materials price index rose 6.0% m/m

NZD Pairs

New Zealand trade balance in Feb. 2022: -N$385B

NZ Consumer confidence lowest since 2008 global financial crisis: Westpac survey

The International Monetary Fund (IMF) says the Reserve Bank of New Zealand needs to make “significant increases” to the Official Cash Rate (OCR)

AUD Pairs

Workers set to take a real pay cut of 1.5% as inflation surges, RBA boss warns

Australia & New Zealand Banking Group Ltd.’s guage of consumer confidence dropped 4.8% to 91.2 points in the week to March 20

AU manufacturing PMI improves from 57.0 to 57.3 in March

AU services PMI higher from 57.4 to 57.9 in March

JPY Pairs

Japan’s central bank renews powerful easing pledge after hawkish Fed signal

Japan to compile fresh stimulus package to cushion fuel blow, PM says

Japan PMI manufacturing rose to 53.2 in March, PMI services rose to 48.7

BOJ board agreed inflation may overshoot expectations – Jan meeting minutes

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