The U.S. Dollar is trading in more familiar territory to the start of the month as the crushing rally for the buck seems to have come to a halt.
Overview
At the moment, the market mood is rather optimistic while not fully pricing in a recession down the line. Comments from officials about tightening as needed, but not getting too aggressive made for relief all across the board as equities also improved. Although WTI Crude oil prices remained below $100.00/barrel, even petro-currencies saw a jump against the greenback. We shall see if there is a chance for a reversal since the debate remains about just how much pressure there is in the future since the war, supply-chain lag, and the effects of higher borrowing do not present clear solutions currently.Equities could go on a bit of a recovery run as earnings for Q2 come out and if satisfying there could be some return to risk appetite. There is potential for an olive branch to be thrown at the whole Russia-EUR energy crisis this week if, after scheduled maintenance, the Russians decide to keep the flow of the Nord Stream pipeline towards the continental members.If so, it would mark a break from thinking that all energy coming from there is done with and maybe be a show of willingness for negotiations by Russia. Again, an idealistic possibility, but one that must be noted since much of the losses EUR confronts come from questions regarding the economy’s ability to keep going without Russian energy imports. Be also on the lookout for central bank decisions out of Japan and Europe on Thursday.
What to Watch Today…
- No major economic events are scheduled for today
Back to Back TOP Wins | #1 G10 Forecaster for Q1 2022
Bloomberg ranks Monex USA (formerly Tempus) as the top G10 Forecaster, NZD, CHF, AUD, MXN, and GBP! Learn More
EUR
The Euro is mounting a comeback after losing all the value it managed to collect over 20 years. Presently, the belief is that the global economy remains highly volatile but there is a chance that any recessionary pressures that come will be temporary. As mentioned in the previous section, much of the stability of the European economy could be handed a break if indeed the Russians allow for even a limited flow of fuels to the EU countries.
There has been no sign of the conflict ceasing or even lowering in its intensity, but worth mentioning that Ukraine’s President Volodymyr Zelynskyy fired his top prosecutor as well as his spy chief, moves that matter tremendously in a time of invasion and war.
GBP
Sterling is also trying to get back from the pounding it took last week as the dollar established itself safe haven in the midst of high expectations for recession. In the U.K., there is a race for choosing the Prime Minister and we will likely get more clarity in the next few days about who the Tories feel should represent them.
We shall also see if anything materializes from the opposition that could trigger a snap general election. On Tuesday, Chancellor of the Exchequer Nadhim Zahawi and Bank of England Governor Andrew Bailey will speak on the economy, surely their comments can make an impact on FX flows.
