ECB made no changes to monetary policy at the April meeting.

US bond yields have continued to move higher with the 10-year yield around 2.85% on Monday and the highest level since December 2018 before a slight correction. The dollar trade-weighted index posted a 2-year high as low-yield currencies came under sustained pressure.

Japanese Finance Minister Suzuki stated that the negative impacts of yen weakness were greater than the benefits and Bank of Japan Governor also issued a measured warning, but the verbal intervention had little impact.

The yen overall remained under heavy and sustained selling pressure and crashed to a 20-year low against the dollar on Tuesday.

The ECB made no changes to monetary policy at the April meeting with the main refi rate held at 0.0% which was in line with consensus forecasts.

As far as the economy is concerned, President Lagarde stated that downside risks to the economy have increased substantially while inflation risks were higher. On a longer-term view, however, the bank expects inflation will gradually move back to target and possibly below.

Lagarde stated that the bank was sticking to its planned sequence and complete asset purchases first which is likely to be during the third quarter. She added that it will start raising rates some time afterwards which could be a week or several months. The rhetoric failed to support the Euro with markets having already priced in more aggressive tightening.

The New York Empire manufacturing survey strengthened sharply to 24.6 for April from -11.8 previously and well above consensus forecasts of 1.0. There was a slight easing in the rate of increase of prices received, but the prices paid index strengthened to a fresh record high.

There was, however, a sharp weakening in confidence surrounding the outlook with expectations surrounding business conditions sliding to the lowest level since the second quarter of 2020.

Unease over the Ukraine situation increased after the Russian missile attack on Lviv. There are also strong expectations over a heavy battle in the Donbass over the next few weeks with Ukraine President Zelensky stating that the Russian advance had started. Ukraine fears continued to underpin energy prices in global markets and a late-winter storm triggered a surge in US natural gas prices.

The latest CFTC data recorded a further increase in short, non-commercial Sterling positions to over 53,000 contracts in the latest week from below 42,000 previously. This was the largest short position since late 2021 and the second-highest short position since November 2019. The overall positioning will maintain the potential for a Sterling rebound if there is a shift in sentiment.

Confidence in the Euro-zone outlook remained weak with the ECB still seen as lagging most other major central banks. Ukraine concerns also sapped Euro support, especially with a further increase in energy prices.

Overall yield spreads boosted the dollar amid expectations of aggressive Fed tightening. The dollar index strengthened to a 23-month high. EUR/USD slumped to 23-month low near 1.0750 before a slight correction.

Overall yields undermined the Japanese currency, and the yen came under heavy selling pressure. Warnings from Bank of Japan Governor Kuroda and Finance Minister Suzuki had little impact on the yen. USD/JPY surged to 20-year highs above 128.00.

The Swiss franc was hampered by higher global yields with USD/CHF at 11-month highs above 0.9450.

Sterling was held in relatively tight ranges as global moves dominated and UK markets were closed. GBP/USD attempted to hold above 1.3000 but traded just below this level on Tuesday. GBP/EUR held around 1.2050. Dollar strength hampered commodity currencies.

Unease over Chinese demand also undermined the Australian dollar with AUD/USD dipping to below 0.7350 before a recovery to 0.7370. High energy prices did support the Canadian dollar with USD/CAD below 1.2600.

Economic Calendar

13:15CAD Housing Starts(MAR)238K247.3K
13:30USD Building Permits(MAR)1.850M1.865M
13:30USD Building Permits (M/M)(MAR)-1.60%
13:30USD Housing Starts(MAR)1.690M1.769M
13:30USD Housing Starts (M/M)(MAR)6.80%
13:30CAD Foreign Securities Purchase(FEB)13.49B
17:30SNB Chairman Jordan Speaks

*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.