The war in Ukraine continues with no clear progress by either side, and this is keeping markets depressed, but hugely volatile. US markets fell but held the Feb 24th invasion low, however European markets, which dipped below last week recovered, with a particularly strong showing from oversold DAX. The main news item, US CPI, was in line with estimates, and had little effect on markets.
The dollar (DXY) hit a new two-year high, and all currencies were down. EUR rose into the ECB meeting, and then fell away despite a relatively hawkish stance from President Lagarde, paving the way for rate hikes. GBP was sharply down, making a 16-month low. Notably, and unusually JPY fell sharply all week, unlike its fellow safe haven Gold, which shot up to $2,070, within a whisker of its all-time high, before falling back sharply. Similarly, Oil spiked up to highs not seen since 2008, before pulling back sharply. 10-year yields followed the dollar and reversed last week's drop.
WEEKLY PRICE MOVEMENT
The biggest index mover was oversold DAX, up 4.07%. The top forex mover was USDJPY down 2.18%. Bitcoin and Ethereum were flat again. Tech underperformed generally as the rate hike looms. We are seeing notable divergence by the weaker FANGs NFLX and FB.
Last week's EURNZD long position made 0.66%, which means I am ahead 8.25% this year, with 6/9 (66.7%) wins. This week I am expecting the BoE will not raise rates and selling GBPJPY.
Note we use Google Finance data for daily movements, listing UUP as a proxy for DXY. All references to ‘the dollar’ are based on DXY. The equity and index prices are now based on the cash close each day.
NEXT WEEK
Although Ukraine is still dominating the headlines, all eyes will be on the Fed on Wednesday for their anticipated first rate hike (25bp to 0.50%) since 2019. This is 97% likely (and priced in) according to the CME Fedwatch tool. Also notable is the BoE decision. They raised rates by 25bp last month, so a further hike is less likely. The US, China and Canada all report Retail Sales, expected to be sluggish. And finally, next week is the two week period we get every March where the US enters DST two weeks before Europe, meaning US markets open and close an hour earlier for Europeans.
CALENDAR (all times are GMT, volatile items in bold)
Monday March 14
02:00 China FDI (time approx.)
Tuesday March 15
00:30 Aus House Price Index
00:30 RBA MPC Minutes
02:00 China Retail Sales (e2.8% p1.7%)
07:00 UK AHE/UnEmp (UnEmp e4.0% p4.1%)
10:00 Eurozone Ind Production
10:00 Eurozone ZEW Economic Sentiment
10:00 Germany ZEW Economic Sentiment
12:30 US PPI
23:50 Japan Import/Exports/TB
Wednesday March 16
04:30 Japan Industrial Production
10:30 Germany 10Y Bond Auction (time approx.)
12:30 US Retail Sales (MoM e0.6% p3.8%)
12:30 Canada BoC CPI (Core e4.8% p4.3%)
18:00 Fed Rate Decision/Statement (e0.5% p0.25%)
18:30 FOMC Press Conference
Thursday March 17
00:30 Aus Jobs/UnEmp (UnEMp e4.1% p4.2%)
10:00 Eurozone CPI
12:00 BoE Rate Decision/Statement (e0.5% hold)
12:30 US Building Permits/Housing Starts
12:30 US Jobless Claims
12:30 Philly Fed Mfr Survey
23:30 Japan National CPI
Friday March 18
03:00 BoJ Rate Decision/Statement (0.1% hold)
06:00 BoJ Press Conference
10:00 Eurozone Labor Cost
12:30 Canada Retail Sales (e-2.1% p-1.8%)
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