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The March German ZEW economic sentiment index collapsed to -39.3 from 54.3 previously and well below forecasts of 10.0. The current conditions index dipped to -21.4 from -8.1, although this was slightly above expectations. The Euro-zone ZEW expectations index also slumped to -38.7 from 48.6 previously.

According to the ZEW, falling economic expectations are accompanied by a sharp increase in inflation expectations and a recession is becoming increasingly likely.

The New York Empire manufacturing index maintained recent volatility with a sharp decline to a 22-month low of -11.8 for March from 3.1 previously and well below consensus forecasts of 7.0. Companies, however, were more optimistic over the outlook.

The new orders and shipments components also dipped into negative territory, but unfilled orders held firm while employment increased at a slower rate.

The inflation data was mixed with a small decline in the rate of cost increases offset by a faster pace of price increases to a record high while companies expect inflation pressures will intensify. The dollar was resilient despite the weaker Empire data as US yields resisted a significant decline.

ECB President Lagarde stated that inflation is still expected to decline progressively in all scenarios and settle around the 2% target in 2024. She did, however, add that uncertainty surrounding the outlook has increased significantly. There were some concerns that European banks would be undermined by sanctions against Russia.

Russian President Putin stated that Ukraine is not serious in finding a mutually-acceptable solution and the Euro retreated to around 1.0930. There was, however, slightly increased optimism over Russia/Ukraine peace talks on Wednesday and the Euro recovered to 1.0975 with position adjustment ahead of the Fed decision.




US producer prices increased 0.8% for February, marginally below expectations, with the year-on-year rate unchanged at 10.0%. Underlying prices increased 0.2% on the month with the year-on-year increase at 8.4% from 8.5% and below expectations of 8.7%. The data added little to the inflation narrative.

Treasuries posted gains immediately after the US data, but were unable to sustain the advance and yields moved higher towards the European close. US equities also moved higher which limited any potential defensive yen demand and the dollar moved back above the 118.00 level with an advance to 118.25 at the European close.

There are very strong expectations that the Federal Reserve will sanction a 0.25% rate increase at Wednesday’s policy meeting. The statement will be important and markets will take strong notice of the latest interest rate forecasts from individual committee members. Markets overall expect a hawkish stance from the central bank.

Japan’s Tankan manufacturing index edged higher to 8 for March from 6 for February, but the services sector dipped to a 5-month low of -1 from 3 the previous month.

The latest coronavirus data from China provided an element of relief and there was some easing of restrictions and, although there was still an important element of caution, regional equity markets rallied. The yen edged lower on firm risk appetite and the dollar traded around 118.25 with the Euro around 129.80.




Sterling found further support above 1.3000 against the dollar on Tuesday with the firm labour-market data providing an element of support.  A recovery in risk appetite helped underpin the UK currency as commodity currencies posted renewed gains and Euro short covering faded.

There are very strong expectations that the Bank of England will increase interest rates again at the Thursday policy meeting, but there is seen as little chance that the bank will vote for a 0.50% rate increase which limited the potential for Sterling support, especially with concerns over the economic outlook.

Sterling settled around 1.3030 against the dollar after again failing to make any challenge on 1.3100 while the Euro retreated to 0.8390.

The Federal Reserve policy decision will dominate on Wednesday, but there will also be Sterling position adjustment ahead of Thursday’s Bank of England statement. Sterling traded around 1.3065 against the dollar in early Europe with the Euro around 0.8400. Volatility will spike later with the Fed policy and risk conditions crucial.




The Swiss franc lost further ground on Tuesday with the currency hampered by an overall improvement in risk conditions. Expectations of higher global yields also undermined potential support for the domestic currency, especially with gold again declining sharply on the day.

The Euro strengthened to highs around 1.0340 before settling around 1.0300 with the dollar posting a fresh 11-month high around 0.9430. The Euro edged higher on Wednesday with the dollar close to the 0.9400 level as yield trends limited underlying support for the Swiss currency.

Technical Levels

Calendar Levels 



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