Daily Market Update 22/03/2022

“USD climbed against all its Group-of-10 peers as Federal Reserve Chair Jerome Powell voiced a more hawkish tone on monetary policy – the US central bank is prepared to raise interest rates by bigger steps than the quarter-point hike announced last week which jumped from between zero and 0.25 percent to between 0.25 percent and 0.5 percent.”

Main Headlines

Jay Powell has said the Federal Reserve needs to move “expeditiously” towards tighter monetary policy and is prepared to act even more aggressively if necessary to tackle excessive inflation. In remarks delivered at a conference hosted by the National Association for Business Economics yesterday, the Fed chair laid out the case for a series of interest rate increases this year and substantive steps to shrink the central bank’s $9tn balance sheet. Powell expressed confidence that the Fed could continue to tighten policy without sparking a recession, which some fear is inevitable. The “neutral” rate is one that neither aids nor hampers growth and most policymakers believe that figure to be around 2.4 per cent. US stocks sold off after Powell affirmed the Fed’s commitment to using its tools to quell inflation, including possibly raising rates by half a percentage point, rather than the standard quarter-point increase — a move the central bank has not made since 2000.

UK Prime Minister, Boris Johnson, has told Rishi Sunak that his Spring Statement on Wednesday must prove that the government is on the side of people struggling with the crisis in the cost of living. The prime minister’s edict will reinforce expectations that Sunak will cut taxes on fuel, with speculation of either a temporary reduction in VAT, or 5p coming off fuel duty, to offset high prices at the pumps. The chancellor is also under pressure to soften his planned £12bn national insurance rise, intended to raise money to clear an NHS treatment backlog and to fund social care, or to cut other taxes. Treasury insiders say the Spring Statement will be a “policy-light” event. Sunak has been adamant that it is not a “mini-budget” and that major fiscal decisions will be taken in the autumn. It’s confirmed that even if there are relatively few new policies in the statement, Sunak will take decisive action to alleviate pressures on households caused by rising fuel bills and higher inflation.

Markets

GBP

Sterling is stronger against the euro and weaker against the dollar this morning. P&O Ferries faced a barrage of political criticism yesterday as it was unable to confirm when it would restart sailings across the English Channel and the transport minister raised the prospect of a consumer and industry boycott. Politicians from all parties lined up to rebuke P&O during a parliamentary debate, after the company suspended sailings to sack 800 UK-based crew with no notice on Thursday. UK ministers want to replicate the country’s successful Covid-19 vaccine task force to deliver new nuclear power stations at “warp speed”, after Boris Johnson said he wanted atomic power to provide at least a quarter of UK electricity generation by 2050. Increases in pay settlements offered by British employers have remained at their highest since 2008 but continue to lag behind inflation.

EUR

The euro is weaker than most major currencies in the early morning trade. Russia has warned of a breach of its relations with Washington and summoned the US ambassador in Moscow for an official protest over Joe Biden’s labelling of Vladimir Putin as a war criminal, as the US president held talks with European allies on efforts to stop the Russian invasion of Ukraine. EU leaders are deadlocked over whether to hit the Russian energy sector with crippling sanctions as fury mounts over the Kremlin’s “war crimes” in Ukraine. The price of oil surged to nearly $115 a barrel as of yesterday. It is likely that Europe will consider joining a US-led embargo of Russian oil this week, as the West looks for new ways to punish President Vladimir Putin for waging his devastating war in Ukraine. Ford’s vehicle factories in Germany and Spain are facing production disruption this week due to shortages of parts from Ukraine and other locations.

USD

The dollar is well bid against most major currencies overnight. Joe Biden has warned a Russian cyber-attack on the US is coming and told business executives that it is their “patriotic obligation” to strengthen their digital defences. Biden has said only India among the Quad group of countries was “somewhat shaky” in acting against Russia over its invasion of Ukraine, as India tries to balance its ties with Russia and the West. Elevating money on Wall Avenue is turning into more and more troublesome as market gyrations shut the door on large preliminary public choices and the Federal Reserve’s flip to an extra restrictive financial coverage forces firms to pay as much as borrow, by way of debt markets. The CDC (Centers for Disease Control and Prevention) is predicting that the BA.2 variant of Covid-19, also called the stealth variant, will become dominant in the US soon.

Ballinger & CO. Morning Report- 22nd March 2022

Today’s Rates

GBP>EUR – 1.1980

GBP>USD – 1.3188

EUR>USD – 1.1010

GBP>CAD – 1.6625

GBP>AUD – 1.7791

GBP>SEK – 12.468

GBP>AED – 4.8452

GBP>HKD – 10.325

GBP>ZAR – 19.624

GBP>CHF – 1.2327

Today’s Calendar           

·       7:25 a.m.: SNB publishes annual report

·       8:00 a.m.: U.K. Feb. public finances

·       8:20 a.m.: ECB’s Guindos speaks

·       10:00 a.m.: ECB Jan. current account

·       10:30 a.m.: Italy Jan. current account

·       10:30 a.m.: Greece Jan. current account

·       10:35 a.m.: ECB’s Villeroy speaks

·       11:00 a.m.: Euro-area Jan. construction output

·       1:10 p.m.: ECB’s Villeroy speaks

·       1:25 p.m.: Riksbank’s Ingves speaks

·       2:00 p.m.: ECB’s Panetta speaks

·       2:00 p.m.: Hungary central bank rate decision

·       2:15 p.m.: ECB’s Lagarde speaks

·       3:35 p.m.: Riksbank’s Skingsley speaks

·       4:15 p.m.: BOE’s Cunliffe speaks

·       4:15 p.m.: SNB’s Jordan speaks

·       6:00 p.m.: ECB’s Lane speaks

·       Nigeria, Morocco Rate Decisions

·       Fourth annual joint conference of the Bundesbank, ECB and Chicago Fed

Corporate Events

·       Earnings include Partners Group Holding, Poste Italiane, Nemetschek, Capital Concept, Kingfisher, Surgutneftegas, Osram

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