U.S. stocks declined and oil prices jumped, as concerns about rising energy prices, supply shortages and inflation rattled investors once again. St. Louis Federal Reserve President Bullard said he expects inflation to rise in the coming months and has a hawkish stance towards interest rates. Federal Reserve Bank of Cleveland President Loretta Mester said that the U.S. central bank will need to front load its rate rise campaign with aggressive moves, but she doesn't think this path will send the economy into recession. She believes to get the federal funds target rate range to 2.5% by year-end they will need to do some 50-basis- points moves, Ms. Mester said in reference to the possibility the central bank will raise rates by half percentage point increments, rather than in more-common quarter percentage point increases.
US New Home Sales for February fell by 2.0% MoM to 772k to come in worse than expectations of a 1.1% increase to 810k. Released later, EU Consumer Confidence for March printed at -18.7, down from -8.8 and below expectations of -12.9. UK Bank of England Cunliffe will have to explain why he decided against a rate hike at the BoE’s recent policy decision.
AUD/USD trades above the 0.7500 level for the first time this year, helped by gold, pushing higher and nearing its weekly high. Bulls are eyeing a test of October top at 0.7554. The release of stronger than expected February Australian labour data has ticked another box on the journey towards tighter monetary policy. At 4.0%, the February unemployment rate sank to a near 14 year low, while the employment change was double market expectations at 77.4K.
The EUR/USD pair trades around the 1.1000 level after flirting with the weekly low at 1.0960. Broad dollar’s weakness not enough to push the pair higher. The EUR/USD pair bounced from an intraday low of 1.0963 but spent most of the US session struggling to recover the 1.1000 mark. The American dollar gathered momentum mid-European session, accelerating its advance after Wall Street opened sharply down. US indexes pared their slump but were unable to recover the ground lost, still helping high-yielding currencies to recover some ground.
GBP/USD has reached its highest level in nearly three weeks at 1.3300 early Wednesday but has lost its bullish momentum after the UK data. As long as the pair manages to hold above 1.3250, buyers are likely to remain interested in the British pound. The positive shift witnessed in market sentiment weighed on the greenback and allowed GBP/USD to gain traction on Tuesday.
USD/JPY witnessed an intraday pullback from the fresh multi-year peak touched on Wednesday. The Russia-Ukraine crisis drove haven flows towards the JPY and exerted downward pressure. The Fed’s hawkish outlook, elevated US bond yields should help limit any meaningful pullback. The market sentiment remains fragile amid the lack of progress in the Russia-Ukraine peace negotiations. Italy's Prime Minister Mario Draghi noted that Russia is not showing interest in a truce for successful peace talks. Separately, Russian Foreign Minister Sergei Lavrov said that talks with Ukraine are difficult as Kyiv is constantly changing its position.
The US 10-year yield retreated by 8.4 basis points to 2.30%.
Currency ranges over the last 24 hours
WTI Crude traded higher and last traded at $114.35 per barrel.
Gold for April delivery climbed by $25.30 to $1,952.00 per ounce.
Silver finished higher at $25.31 per troy ounce.
To watch for
• FR – Mar Business & Manufacturing Confidence
• FR – Mar Markit Composite PMI
• GE – Mar Markit Services PMI
• EU – Mar Markit Composite PMI
• EU – ECB’s Elderson Speaks
• UK – Mar PMI Manufacturing SA
• UK – BOE financial policy committee report
• US – Initial Jobless Claims
• UK – BOE’s Mann speaks
• US – Mar Manufacturing PMI
• US – Fed Bostic Speaks
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