12 April 2022 – Daily FX Update

Market overview

The U.S. inflation data this week

The U.K. unemployment is lower than before

Gold remains the safe haven

OPEC: Russian oil supply is unreplaceable

FOREX

U.S. dollar Index

The U.S. dollar surged higher in early the trades today, supported by high U.S. bond yields and the anticipated inflation data. The upcoming release most likely will support Federal Reserve’s (Fed) aggressive policy, it is expected to witness the highest inflation figures since December 1981.

These expectations of hefty interest rate increases are likely to be underpinned by the latest consumer price data. The March release is expected to show a gain of 8.4% after a 7.9% gain in February, up 1.2% on the month, while the core data, which excludes food and energy prices, is seen up 6.6% on the year and 0.5% on the month.

The Dollar Index traded 0.2% higher at 100.155, just below last near two-year high of 100.19.

Euro

EUR/USD fell 0.2% to 1.0867, conveying some of the gains seen Monday after Emmanuel Macron won the first round of the French presidential election. The common currency remains pressured by the war in Ukraine, with the sanctions put on Russia continuing to create more mayhem with commodity prices, and thus inflation. The European Central Bank meets on Thursday and has difficulty balancing soaring consumer prices, with German CPI climbing to 7.3% on the year in March, against pressure on growth from the Ukraine conflict. 

Sterling pound

The sterling pound fell 0.2% to 1.3009, despite Britain’s unemployment rate falling to 3.8% in the three months to February, down from the previous reading of 3.9% and below its 4.0% level in early 2020, shortly before COVID-19 cases first swept Europe.

Japanese Yen

Japanese Yen weakened by 0.3% against the greenback to 125.72, near its June 2015 peak of 125.86. Furthermore, a move past the 126 level would take the dollar to its highest against the yen since 2002.

While expectations are strong that the Fed will hike aggressively this year, the Bank of Japan has repeatedly intervened to keep benchmark bond yields around zero.

Indices

U.S. Indices

U.S. indices futures traded slightly higher during the early Asian session gaining around 0.1%. During the regular trading on Monday, the Dow Jones Industrial Average fell 1.19% to 34,308.09, the S&P 500 shed 1.69% to 4,412.53, while the NASDAQ Composite dropped by 2.18% to 13,411.96. These declines followed the U.S. Treasury yields surge before the inflation data later today.

The overnight moves come as investors await the release of March’s consumer price index with market participants expecting the highest annual inflation rate since December 1981.

European Indices

European stock markets are expected to open lower Tuesday, with investors wary ahead of the release of key economic data while the ongoing Ukraine conflict looks set to intensify. In the U.K., the data released earlier Monday showed the unemployment rate fell to 3.8% in February, from 3.9% the previous month.

During the Asian session, the DAX futures contract traded 0.7% lower, CAC 40 futures dropped 2.9%, while the FTSE 100 futures contract fell 0.7%.

Asian-Pacific

Asia Pacific stocks were mostly red during the early session while bonds extended a selloff. Market participants continue to monitor high inflation, tighter monetary policy, and the COVID-19 lockdowns in China. China’s Shanghai Composite inched up 0.01% Hong Kong’s Hang Seng Index was down 0.25%. Japan’s Nikkei 225 fell 1.32%. Meanwhile, in Australia, the ASX 200 index was down 0.58%.

Metals

Gold

Gold prices inched higher during the Asian session. Risk appetite weakened ahead of U.S. inflation data that could support the Federal Reserve’s (Fed) aggressive stance. Spot gold was up 0.2% at $1,956.78 after hitting its highest in nearly a month during the previous session. U.S. gold futures rose 0.6% at $1,960.30.

Other metals

Palladium gained 0.9% to $2,453.83 after hitting its highest since March 24 at $2,550.58 on Monday following a sale block by London markets. Meanwhile, spot silver traded up 0.3% at $25.16 per ounce and platinum rose 0.7% to $983.66.

Energy

Crude oil

Oil was up on Tuesday morning in Asia, reversing its losses from the previous day. Investors are considering more sanctions on Russia. The Organization of the Petroleum Exporting Countries (OPEC) warned that it is impossible to replace the Russian oil supply. Meanwhile, market participants await the U.S. crude oil supply from the American Petroleum Institute today.

Both Brent and WTI contracts settled 4% lower on Monday as COVID-19 lockdowns in China drove fuel demand concerns. During the Asian session today, Brent oil futures rose 1.80% to $100.25 and crude oil WTI futures jumped 1.96% to $96.14.

Natural gas

Natural gas prices hit a 13-year high on Monday after a 10% climb last week. On Monday, week over week, natural gas arrivals at LNG terminals were 4% higher. Furthermore, the weather is expected to be colder than average in the mid-West over the next week. This scenario will increase the demand for heating gas.