RUSSIA-UKRAINE WAR, CPI DATA, GDP DATA, EUR/USD – TALKING POINTS:
- EUR/USD volatility might swell from cascade of key Eurozone and US information
- Russia-Ukraine warfare continues to roil markets, pressure worldwide relations
- EUR/USD technical outlook bearish as haven demand continues to swell
The US Dollar might sharply rise within the week forward as market-wide threat aversion grips traders amid the continuing Russia-Ukraine warfare and hawkish feedback from the Fed. The anti-risk Japanese Yen and Swiss Franc may get a push larger, although the Greenback’s unparalleled liquidity might give it an edge over its counterparts.
Last week, markets tumbled following feedback from the Fed implying a robust hawkish bias regardless of a slew of volatility-inducing influences. On Monday, the S&P 500 gapped decrease, although it ended the day within the inexperienced. Risk aversion permeated throughout asset lessons nonetheless, and noticed the US Dollar, Swiss Franc, and Japanese Yen shut larger in opposition to most G-10 currencies.
S&P 500 Index – Daily Chart
Source: Buying and sellingView
Commodity-linked currencies such because the Swedish Krona, Norwegian Krone, in addition to the Australian and New Zealand Dollars had been hit notably exhausting. Investors might even see this dynamic exacerbated within the week forward, however what would be the largest market movers?
FRENCH ELECTION RESULTS, MARKET REACTION
The market response to French President Emmanuel Macron’s win was considerably muted. The Euro and regional fairness markets didn’t exhibit notable jubilance the day after the outcomes had been introduced. Traders had been doubtless pricing in a victory for the incumbent, and with that political threat out of the way in which, European shares are actually targeted once more on macroeconomic considerations (just like the Fed).
Meanwhile in Ukraine, the strategic port metropolis of Mariupol is now largely below the management of Russian forces. The information is now targeted the Azovstal steel works manufacturing facility. Reports point out the Kremlin could also be beginning a brand new assault targeted on seizing the economic complicated from Ukrainian forces.
Map Showing Russian Advance into Ukraine
On Monday, US Defense Secretary Lloyd Austin mentioned he hopes to see a “weakened Russia” following Moscow’s actions in opposition to its Slavic neighbor. While Washington has expressed no intent of sending its personal troops or NATOs, policymakers have provided weapons to Kyiv and pledged to proceed that help, a lot to the chagrin of Moscow.
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Unsurprisingly, this has been a supply of nice consternation between Russia and the US, who had been already on precarious phrases previous to the invasion. However, the battle has additionally widened the fissure between Washington and Beijing, an already-fragile relationship following commerce wars initiated by the Trump administration.
US officers warned China that if it supplies “material support” to Russia, sanctions might be imposed. During the Friends of Europe convention panel dialogue, United States Deputy Secretary of State Wendy Sherman despatched a pointy message to policymakers in Beijing:
“They have seen what we have done in terms of sanctions, export controls, designations, vis-a-vis Russia, so it should give them some idea of the menu from which we could choose if indeed China were to provide material support”.
Washington provided a friendlier message toNew Delhi, stressing that it could work with the federal government to take away India’s reliance on Russian weapon imports. Tensions between China and India over the disputed border alongside the so-called “Line of Actual Control” (LAC) within the Himalayan mountains have been a excessive precedence for Indian President Narenda Modi.
Securing army tools in a dependable relationship is essential not solely in Sino-Indian relations but in addition amid a worldwide surge in inflation amid disrupted provide chains. These ongoing negotiations illustrate how within the globalized world of the twenty first century, it is vitally uncommon that actions in a single nook of the world won’t reverberate to the opposite, impacting coverage in addition to markets.
US, EUROZONE CPI AND GDP DATA
Upcoming Eurozone CPI and GDP information may rattle the Euro and exacerbate its losses in opposition to the US Dollar if the outcomes persuade merchants that the ECB might should rethink its price hike plans. Last week, the Euro plunged after central financial institution President Christine Lagarde mentioned financial authorities may have to chop the expansion outlook on account of the fallout from the Ukraine warfare.
Combined with the Fed’s hawkish feedback, this noticed EUR/USD plunge as cash markets elevated their bets of ultra-aggressive price hikes in 2022. US GDP and private earnings/spending information can be revealed this week, and should exacerbate the pair’s volatility if the figures reinforce the Fed’s hawkish outlook.
If US financial information surprises to the upside, the US Dollar might get a push from two narrative forces. The first is the idea that robust financial information will reinforce and probably even inflate an already-hawkish Fed outlook. The second is tied to the primary: the prospect of tighter credit score circumstances might trigger markets to panic and push traders into the arms of the Greenback.
EUR/USD TECHNICAL OUTLOOK
EUR/USD is at the moment buying and selling at 1.0697, the bottom degree since March 2020, throughout one among historical past’s largest selloffs in monetary markets throughout asset lessons. The pair’s decline began in January 2021, although a steeper bearish incline developed in May and noticed the autumn speed up. On Monday, EUR/USD had the largest one-day drop since March 31, 2022.
EUR/USD – Daily Chart
Source: Buying and sellingView
While there seems to be a directional bias, optimistic RSI divergence may point out a reversal developing. However, it needs to be famous that an noticed phenomenon in a single indicator isn’t a assured prediction of a particular consequence. EUR/USD’s downtrend may speed up regardless of the divergence proven within the Relative Strength Index.
Written by Dimitri Zabelin for DailyFX