No Headway in Ukraine peace talks.

There were no positive developments surrounding the Ukraine conflict during the weekend. Devastation of the city of Mariupol has continued with further accusations of war crimes, while Ukraine has rejected calls to surrender the city.

There has not been any headway in peace talks while US President Biden warned China over the consequences of providing material support for Russia.

Fed Governor Waller stated that the US economic data screams for a 50 basis-point rate increase, although geo-political concerns demand caution.

Waller also considered that the bank should tighten more aggressively to get in front of rising inflation.

He added that any policy norm would dictate that rates should be higher than we are today and added that data suggests the central bank will be moving towards a 0.50% rate hike at one or more of the upcoming meetings.

The comments from Waller triggered renewed expectations of a more aggressive policy stance from the central bank which provided significant dollar support.

Following last week’s Fed policy meeting and hawkish rhetoric from some Fed officials, markets will monitor comments from Fed Chair Powell closely.

Powell is due to deliver a speech on Monday with the comments parsed closely to assess whether he wants to signal a stronger possibility of more aggressive rate hikes.

Oil prices have continued to move higher amid underlying concerns over supply shortages, especially with strong pressure for Russian crude to be shunned.

In political terms, the focus has been on measures by governments to alleviate the upward pressure on retail energy prices through temporary cuts in fuel taxes.

CFTC data recorded an increase in short, non-commercial Sterling positions to over 29,000 contracts in the latest week from 12,500 the previous week and the largest short position for over two months. The data indicates that Sterling did not secure buying support ahead of last week’s Bank of England policy decision.

The Euro dipped sharply lower following hawkish rhetoric from US Fed Governor Waller. The dollar was, however, unable to hold intra-day highs amid choppy trading. US bond yields overall were little changed which curb volatility to some extent. EUR/USD did find support just above the 1.1000 level and recovered to 1.1040 on Monday.

USD/JPY settled above the 119.00 level with 6-year highs around 119.40 before a slight correction.

Sterling was slightly more resilient on a limited reassessment of Bank of England expectations. GBP/USD secured net gains to 1.3155 with no attack on 1.3200. GBP/EUR rallied to around 1.1900 with narrow ranges.

The Swiss franc found renewed buying support with EUR/CHF dipping to 1.0300 before stabilising. USD/CHF also retreated sharply to 0.9320 before a limited recovery.

The Australian dollar maintained a strong tone with AUD/USD advancing to 2-week highs around 0.7425 before a retreat to 0.7400 as equities retreated. USD/CAD also retreated to just below 1.2600 before a slight recovery.

Economic Calendar

Expected Previous
07:00 EUR German PPI (M/M)(FEB) 1.70% 1.40%
07:00 EUR German PPI (Y/Y)(FEB) 26.20% 25.00%
16:15 European Central Bank President Lagarde 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.