23 March 2022 - Markets move higher despite Hawkish comments from Jerome Powell


Market Headlines

Wall Street and the ASX burst higher Tuesday, brushing off hawkish comments from Fed Chair Jerome Powell and a continued rise in bond yields. Yields on shorter-term and longer-term U.S. government bonds have been converging rapidly, stirring fears along with skepticism that the bond market is close to signalling a looming recession.


Yields, which fall when bond prices rise, have been climbing all year based on expectations that the Federal Reserve will raise short-term interest rates. They got another big boost on Monday, after Fed Chairman Jerome Powell emphasized that the central bank was prepared to raise rates in half-percentage steps to fight inflation. However, yields have climbed particularly sharply on shorter-term Treasury’s, drawing almost as much attention to differences between yields as to their absolute levels.

The Dallas Fed warned that a sustained halt in Russian energy exports could have a dire effect on the global economy. If the bulk of Russian energy exports is off the market for the remainder of 2022 a global economic downturn seems unavoidable.


FX

AUD/USD

The positive tone of European and American indexes backed the Aussie higher, despite central bank’s imbalances. AUD/USD opens the day near 5-month highs. We have some small resistance to clear at 0.7470 with the next target 0.7550 and the highs from October 2021. Bids should come in at 0.7420 and then 0.7380.


EUR/USD

The EUR posted a tepid advance vs the greenback, with the pair now trading in the 1.1020 price zone. The Union is too close and too affected by the Russia-Ukraine conflict to see its currency appreciate, despite mounting speculation the ECB will have to hike rates by at least 50 bps before the year-end.


GBP/USD:

The GBP/USD pair reached a fresh three-week high of 1.3273, retaining most of its intraday gains by the end of the day. The ongoing improvement in risk appetite, to which pound sterling is normally quite sensitive, has been able to overpower recent dovish BoE-related weakness in GBP/USD. Of course, that means that if global equities do start selling off again, the pair is at risk of giving up its newfound 1.32 status once more.


USD/JPY:

The American dollar edged lower against most major rivals on Tuesday, except against the Japanese yen, with USD/JPY soaring to 121.02, its highest since February 2016. The greenback advanced during the Asian session, following the lead of soaring US government bond yields after Fed Chair Powell hinted at a 50 bps hike in May.


The two-year Treasury yield which is especially sensitive to changes in monetary policy climbed to 2.152% Tuesday, from 2.132% Monday.



Commodities

WTI Crude traded lower and last traded at $108.75 per barrel.

Natural Gas prices finish at their highest level since early February, closing up 5.9% at $5.187 /mmBtu.

Gold consolidated lower at $1934 per ounce.

Silver finished lower at $24.88 per troy ounce today


To watch for

• UK – Feb CPI m/m

• UK – BOE Bailey speaks

• EU – ECB’s Lagarde Speaks

• EU – Mar Consumer Confidence

• BOJ – Minutes of Jan. Meeting



Disclaimer: This material is provided by Navigate Global Payments (Navigate) ACN 615 699 888, AFSL 502711. The material contains general commentary only and does not constitute investment or any other advice. Certain types of transactions, like futures, options and high yield securities can be risky, and not suitable for all investors. This information has been prepared without considering your objectives, financial situation or needs. Please seek your own independent legal or financial advice before proceeding with any investment decision. The information is believed to be accurate at the time of compilation and is provided in good faith. Navigate does not warrant the accuracy or completeness of any information contributed by a third party. The information is subject to change without notice and Navigate is under no obligation to update the information. The information contained in this material are opinions of the author at the time of writing and does not constitute an offer, recommendation to act, a solicitation of an offer, or an inducement to subscribe for, purchase or sell any financial instrument or to enter a legally binding contract. This information, including any assumptions and conclusions is not intended to be a comprehensive statement of relevant practise or law that is often complex and can change. Past performance is not a reliable indicator of future performance. Any forecasts given in this material are predictive in character.


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Disclaimer

This material is provided by Navigate Global Payments (Navigate) ACN 615 699 888, AFSL 502711.  The material contains general commentary only and does not constitute investment or any other advice.  Certain types of transactions, like futures, options and high yield securities can be risky, and not suitable for all investors.  This information has been prepared without considering your objectives, financial situation or needs.  Please seek your own independent legal or financial advice before proceeding with any investment decision.  The information is believed to be accurate at the time of compilation and is provided in good faith.  Navigate does not warrant the accuracy or completeness of any information contributed by a third party. The information is subject to change without notice and Navigate is under no obligation to update the information. The information contained in this material are opinions of the author at the time of writing and does not constitute an offer, recommendation to act, a solicitation of an offer, or an inducement to subscribe for, purchase or sell any financial instrument or to enter a legally binding contract.  This information, including any assumptions and conclusions is not intended to be a comprehensive statement of relevant practise or law that is often complex and can change.  Past performance is not a reliable indicator of future performance. Any forecasts given in this material are predictive in character.Navigate Global Payments Pty Ltd nor its related parties or officers accepts no liability whatsoever for any loss or damages suffered through any act or omission taken as a result of reading or interpreting any of the information contained or related to this site.