Euro jumps higher on Ukraine peace hopes.

The Euro posted significant gains in Europe on Tuesday after comments from Russian officials that the peace talks with Ukraine had been constructive. Ukraine officials also adopted a more positive stance with comments that enough ground had been made to hold a meeting between President Zelensky and Russian President Putin.

The Euro then jumped higher following Russian comments that it will scale back military activity around Kyiv and Chernihiv.

US officials stated that some units had been withdrawn from the Kyiv area, but remained sceptical over the implications with the moves due to a wider re-positioning and switch to a focus on Eastern Ukraine.

The Euro held a firm tone on Wednesday with the dollar generally on the back foot.

The Japanese fiscal year-end is on March 31st and there was further strong evidence of capital repatriation in Asia on Wednesday.

The Bank of Japan continued its operations to cap domestic bond yields, but the yen posted strong gains with USD/JPY sliding to lows below 121.50 in volatile conditions.

Position adjustment will remain an important element for the yen during Wednesday, with month-end trading also having a wider impact on currencies.

US consumer confidence strengthened to 107.2 for March from a revised 105.7 previously and marginally above consensus forecasts of 107.0. There was a significant improvement in the current conditions index with increased optimism over the labour market, but a net decline in the expectations component for the month.

Philadelphia Fed President Harker stated that interest rate hikes need to be deliberate and methodical to a neutral rate of 2.5%. He noted that supply-chain pressures are starting to ease, but that there is the risk of sharp upward prices in the services sector. He added that he would not take 50 basis-point hikes off the table, but was not committed to them either.

US longer-term bond yields edged lower and there was a further flattening of the yield curve with the 10-year yield only 2 basis points above 2-year yields. Lower longer-term US yields also capped potential dollar support.

Oil prices came under further pressure on Tuesday with unease over underlying demand conditions, especially with further lockdowns in China.

Optimism over Ukraine/Russia peace talks also undermined crude during the day.

Markets will monitor OPEC rhetoric closely with meetings over the next two days.

Russia’s demands for payments for gas exports to Europe in roubles from March 31st will also be important with European countries refusing to comply at this stage.

The Euro jumped higher on hopes for progress in peace talks between Russia and Ukraine. There was also a further net increase in ECB rate expectations during the day. Lower energy prices also supported the Euro. EUR/USD jumped to highs near 1.1140 before a correction and traded above 1.1100 on Wednesday.

Year-end repatriation underpinned the Japanese currency. USD/JPY dipped sharply to lows around 121.30 in Asia before a correction. The Swiss franc was resilient with USD/CHF dipping to 0.9275 lows.

Sterling lost ground overall amid further concerns over the economic outlook and doubts over Bank of England rate hikes. GBP/EUR dipped sharply towards 1.1800. GBP/USD surged to 1.3150 as the Euro jumped and did manage to trade above 1.3100 on Wednesday.

Commodity currencies advanced against the dollar and recovered from intra-day lows against the Euro. AUDUSD regained 0.7500 with net gains to 0.7530 on Wednesday and close to 5-month highs. USD/CAD dipped back below 1.2500 despite the retreat in oil prices.

Economic Calendar

Expected Previous
08:00 CHF KOF Leading Indicator(MAR) 108.5 105
08:00 Italy - Consumer Confidence(MAR) 113.4
09:00 European Central Bank President Lagarde Speaks
13:15 USD ADP Employment Change(MAR) 388K 475K
13:30 USD GDP (Annualized) 2.10% 7.00%
13:30 USD GDP Price Index (Q/Q) 7.20%

*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.