Measured optimism over Ukraine peace hopes.

There have been further Russian missile attacks on Ukraine cities including the shelling of non-military targets. US military intelligence, however, has stated that the Russian advance remains stalled in most areas due to heavy Ukrainian resistance.

There was further optimism that peace talks could make headway while a senior advisor to President Zelensky stated that the war could be over by early May. There were reports that the EU would impose a further harsh sanctions package on Russia later in the day.

There was further selling on US Treasuries during Monday with markets fretting over underlying inflation trends. Although energy prices retreated sharply, there were increased reservations over food-price inflation. The 10-year yield increased to 2.14% on Tuesday, the highest reading since July 2019, before a retreat to 2.12%.

The impact of higher bond yields was again illustrated on Monday with the yen remaining under pressure despite weaker equity markets. USD/JPY posted fresh 5-year highs near 118.40 in Asia before a significant correction to just below 118.00 as the dollar retreated against all majors. The Swiss franc also lost ground with USD/CHF at 11-month highs above 0.9400 before a correction.

Oil prices have declined sharply with WTI dipping below the $100 p/b level. There has been an element of optimism over peace talks in Ukraine and the lockdowns in China have also raised fresh doubts over global demand trends.

The latest UK labour-market data recorded a decline in unemployment to 3.9% in the three months to January from 4.1% and below expectations of 4.0%. There was also a further strong increase in payrolls of 275,000 for February with vacancies posting a fresh record high. Headline average earnings increased 4.8% in the year to January with a 3.8% annual increase.

Fears over the Euro-zone economy eased slightly during Monday as energy prices declined. The Euro posted significant net gains and EUR/USD challenged the 1.1000 level on Tuesday as the dollar dipped lower.

Higher US yields again undermined support for the yen with the Bank of Japan maintaining a very dovish stance. USD/JPY tackled resistance above 118.00 and secured 5-year highs around 118.40 on Tuesday before dipping below 118.00. EUR/CHF advanced to above 1.0300.

Sterling was unable to make headway as domestic economic fears increased with limited reaction to the jobs data. GBP/USD found support close to 1.3000 and edged higher to 1.3030. GBP/EUR dipped to 1.1870 amid wider Euro gains.

Commodity currencies posted hefty losses on the day as commodity and energy prices came under heavy pressure. AUD/USD dipped sharply to below 0.7200 and traded around 0.7185 on Tuesday. USD/CAD also posted net gains to around 1.2840 as energy prices retreated.

Economic Calendar

07:00GBP Average Earning Including Bonus(JAN)4.30%
07:00GBP Claimant Count Change(M/M)(FEB)-28.0K-31.9K
07:00GBP Unemployment Rate(JAN)4.10%4.10%
07:30CHF PPI (Y/Y)(FEB)5.40%
07:30CHF PPI (M/M)(FEB)0.60%
07:45France CPI (M/M)(FEB)0.30%
10:00German ZEW Survey (Current Situation) (MAR)-6-8.1
10:00German ZEW Survey (Economic Sentiment)(M/M)(MAR)5554.3
10:00Euro-Zone Industrial Production (M/M)(JAN)1.20%
10:00Euro-Zone Industrial Production (Y/Y)(JAN)-0.50%1.60%
10:00EUR Euro-Zone ZEW Survey (Economic Sentiment)(MAR)48.6
11:00OPEC Monthly report
12:15CAD Housing Starts(FEB)245.0K230.8K
13:30USD PPI Ex Food & Energy (M/M)(FEB)0.50%0.80%
13:30USD PPI Ex Food & Energy (Y/Y)(FEB)7.90%8.30%
13:30NY Empire State Manufacturing Index(MAR)3.1
13:30USD PPI (Y/Y)(FEB)9.10%9.70%
13:30USD PPI (M/M)(FEB)0.50%1.00%
21:00USD TIC Net Long-Term(JAN)114.5B
21:45NZD Current Account (Q/Q)7.91B-8.30B
23:50JPY Exports (Y/Y)(FEB)9.6
23:50JPY Merchandise Trade Balance Total(FEB)-1607.0B-2193.5B

*All rates shown are indicative of interbank rates and should only be used for indication purposes only. It is important to note that foreign exchange rates fluctuate and that rates may vary depending on the amount and the base currency that is purchased or sold. Rates are correct as of 8:00am UK time. CentralFX are not responsible for the rates shown.