30 March 2022 - Positive talks between Russia and Ukraine buoyed investor sentiment overnight


Market Headlines

Positive talks between Russia and Ukraine buoyed investor sentiment overnight and helped Wall St to another session of gains. The NASDAQ was +1.9%, The S&P 500 +1.2% while the Dow Jones finished +1%. Oil edged fractionally lower while in bond markets, the US 2 year and 10-year yields inverted for the first time since 2019, albeit momentarily. AUD/USD traded in a 0.7456/.7519 range before settling just above 0.75c late in the North American session. The ASX finished the session 0.7% higher, led by tech and banking stocks ahead of the Federal Budget release.

European equities opened higher with the Euro Stoxx 50 +1.4% and FTSE100 +0.9%. The yield on 10-year US Treasuries advanced 3bp to 2.49%. Brent crude fell 0.3% to $112.19 a barrel. Consumer Sentiment in Germany fell to -15.5 going into April the lowest level in more than a year, and below expectations of -8.1. The ECB’s De Cos commented that the March inflation reading will be particularly negative, adding that Europe should pool resources for War-related spending. French Consumer Confidence fell to 91 in March from a prior 98.

The 2022 Australian Federal budget was released with Treasury forecasting a deficit of A$78bn, with net debt expected to peak at 33.1% in June 2026. Voters will be offered $8.6bn in payments, tax rebates and cuts to fuel excise. Treasury expects the Jobless rate to drop to 3.75% in 3Q FY20. The budget is forecasting a return to real wages growth in 2022-23 by 3.25% versus an inflation rate of 3%.


Currencies

Following the open, AUD/USD fell sharply back to 0.7480 before rebounding back above 0.7500. NZD/USD fell from highs of 0.6909 to 0.6878 lows. GBP/USD slid to lows of 1.3052 briefly before climbing back up above 1.3090. EUR/USD climbed higher to trade at 1.10465 highs. USD/CAD continued to trend down to 1.2482. USD/JPY remained close to daily lows of 123.115.


Headlines that Russia would sharply cut military operations near Kyiv and Chernihiv and that a meeting between Putin and Zelenskiy was possible saw risk higher with US equity futures and European cash markets moving to new highs. EUR/USD moved up from near 1.1040 to trade above 1.1100, making its way to new highs of 1.1137 while GBP/USD jumped from near 1.3060 to trade up to highs of 1.3157. USD/JPY down from near 123.60 to lows of 1.2250.


Less of a rally was seen for the commodity currencies with the local unit moving back above 0.7500 before falling to new lows of 0.7456 as NY arrived. NZD/USD hit highs of 0.69165 before falling to lows of 0.6876 while USD/CAD briefly fell to 1.2470 lows before bouncing back towards 1.2520.


Currency ranges over the last 24 hours


Market Outlook

A quieter day ahead on the data front before a flurry of economic releases set for release into quarter-end from tomorrow. The Bank of England’s Broadbent will offer his latest views on the outlook for policy settings, given the war in Ukraine. The next policy decision is not until May 5th though which ordinarily would mean limited scope for a major reaction. However, the OIS rate has just 31bps of further tightening priced in for that meeting, so the market expects that any suggestion from Gov Bailey that a 50bps hike is on the table may give sterling a strong boost.

Choppy conditions continued for the AUD/USD overnight where it traded in a 0.7456/.7519 range. All key technical levels remain intact with offering interest still expected ahead of 0.7550 while the market believe demand should materialise ahead of 0.74c.

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