Fundamental analysis GBPUSD, EURUSD, NZDUSD, AUDUSD, USDCAD, XAUUSD, Brent, WTI for 24.03.2022
24.03.2022 15:44
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The US dollar strengthened against all leading currencies on Thursday. The USD received medium-term support from the Fed. On Monday the head of the regulator, Powell, signalled a willingness to accelerate the pace of rate hikes. Also one of the hawks, the head of the St Louis Federal Reserve Bank James Bullard called for a rapid and aggressive tightening of monetary policy. The official said it was necessary to take advantage of the experience of 1994, when the Fed raised the rate by 250 basis points in one year, with rates being raised by 50 and 75 basis points in two meetings. In this connection, the position of the most cautious member of the Open Market Committee, Mary Daly, who agreed that the Fed would raise the key rate by 50 basis points in one meeting, seems indicative. At the same time it is worth considering that in 1994, when the Fed was led by Alan Greenspan, labour market conditions were much softer and the amount of monetary stimulus much lower. Also worth noting is the prolonged decline in Treasury yields, which indicates the risk of a recession.
This week EUR/USD is showing an insignificant decline. The resilience of the euro against the dollar looks illogical. The energy crisis in the Eurozone is getting worse, price pressures are rising and consumer confidence has fallen to its lowest level since the pandemic began. The key news this past Wednesday was President Putin's announcement of his intention to accept payments for gas exclusively in roubles. The Russian president's announcement came as a shock to EU countries, which were not prepared for such a development. As a result, gas is up 19% and oil up 5%, while the Russian rouble is strengthen.
GBP/USD is also down, having lost over 100 pips on Wednesday. British inflation data published yesterday signalled accelerating price pressures in the economy. High inflation is pushing the Bank of England to raise its key rate at its May meeting. The English regulator is expected to raise the rate by 25 basis points, while the Fed is planning a 50-point tightening. Currently the monetary policy gap between the Fed and the Bank of England is 0.25% so that both are equal in May. So far, this scenario is the most probable for the market and negative for the pair. Moreover, a drop of UK manufacturing activity due to rising energy prices and a strong decline in retail sales should not be ignored.
AUD/USD and NZD/USD are strengthening this week thanks to investors' rising appetite for risky assets. The New Zealand dollar gained momentum thanks to a significant reduction in the trade deficit. The Australian dollar reacted positively to excellent labour market statistics as well as hawkish monetary policy signals from Governor Lowe of Bank of Australia. The USD/CAD is declining thanks to strong macro releases from Canada. At the moment Canada is the best performing country in overcoming the economic crisis. Also rising oil prices are a driver for the CAD as Canada will increase supplies due to a rejection of Russian energy resources.
Brent and WTI retain high upside potential, which obviously has not yet been fully realised. In response to the freezing of its foreign reserves, Russia has announced a switch to the rouble when selling gas to Western countries. The European Union wants to completely and drastically cut off Russian energy resources, but cannot find alternative sources of supply. Stocks of major petroleum products in the US are shrinking and fuel prices are rising everywhere increasing global inflation. OPEC, meanwhile, continues to follow its previous plan to increase production, while the Iranian oil sector remains under sanctions.
XAU/USD has moderately recovered over the past two days. The drop in the metals market after hitting a multi-year high was expected, but such a deep correction looks illogical. Uncertainty in the global economy continues to intensify. Investizo believes that commodities and metals will be the main risk diversifier in the medium term.
This week EUR/USD is showing an insignificant decline. The resilience of the euro against the dollar looks illogical. The energy crisis in the Eurozone is getting worse, price pressures are rising and consumer confidence has fallen to its lowest level since the pandemic began. The key news this past Wednesday was President Putin's announcement of his intention to accept payments for gas exclusively in roubles. The Russian president's announcement came as a shock to EU countries, which were not prepared for such a development. As a result, gas is up 19% and oil up 5%, while the Russian rouble is strengthen.
GBP/USD is also down, having lost over 100 pips on Wednesday. British inflation data published yesterday signalled accelerating price pressures in the economy. High inflation is pushing the Bank of England to raise its key rate at its May meeting. The English regulator is expected to raise the rate by 25 basis points, while the Fed is planning a 50-point tightening. Currently the monetary policy gap between the Fed and the Bank of England is 0.25% so that both are equal in May. So far, this scenario is the most probable for the market and negative for the pair. Moreover, a drop of UK manufacturing activity due to rising energy prices and a strong decline in retail sales should not be ignored.
AUD/USD and NZD/USD are strengthening this week thanks to investors' rising appetite for risky assets. The New Zealand dollar gained momentum thanks to a significant reduction in the trade deficit. The Australian dollar reacted positively to excellent labour market statistics as well as hawkish monetary policy signals from Governor Lowe of Bank of Australia. The USD/CAD is declining thanks to strong macro releases from Canada. At the moment Canada is the best performing country in overcoming the economic crisis. Also rising oil prices are a driver for the CAD as Canada will increase supplies due to a rejection of Russian energy resources.
Brent and WTI retain high upside potential, which obviously has not yet been fully realised. In response to the freezing of its foreign reserves, Russia has announced a switch to the rouble when selling gas to Western countries. The European Union wants to completely and drastically cut off Russian energy resources, but cannot find alternative sources of supply. Stocks of major petroleum products in the US are shrinking and fuel prices are rising everywhere increasing global inflation. OPEC, meanwhile, continues to follow its previous plan to increase production, while the Iranian oil sector remains under sanctions.
XAU/USD has moderately recovered over the past two days. The drop in the metals market after hitting a multi-year high was expected, but such a deep correction looks illogical. Uncertainty in the global economy continues to intensify. Investizo believes that commodities and metals will be the main risk diversifier in the medium term.