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The Euro-zone current account surplus was unchanged at EUR22.6bn for January. In the 12 months to January, the surplus widened to EUR294bn and 2.4% from EUR247bn the previous year. There were still substantial capital outflows over the year with net outflows of over EUR500bn. The capital account will remain an important focus in the short term with concerns that the Ukraine crisis will trigger further net outflows from the Euro area which will hamper the Euro.

Underlying Euro sentiment remained negative, but the currency was resilient ahead of the New York open and there was limited position adjustment and a covering of short positions as the single currency moved back above the 1.1000 level against the dollar.

ECB council member Villeroy stated that the central bank needed to noramalise policy to keep inflation expectations anchored.

The US Richmond Fed manufacturing index strengthened to 13 for March from 1 previously and above market expectations of 2. New and unfilled orders components both moved back into positive territory while inventories continued to decline. Wages increased at a faster rate and skills shortages intensified. There was a slight easing of upward cost pressures, but with a faster rate of increase for prices received. The Euro held a firm tone with a peak just below 1.1050 before a limited correction.  There was little change on Wednesday with the Euro around 1.1035 as yield trends tended to dominate global currency markets.




The Japanese Finance Ministry stated that it is closely watching movement in the yen exchange rate which increased speculation that the Bank of Japan would be called on to intervene at least verbally to curb the rate of yen losses. 

US Treasuries remained firmly on the defensive ahead of Tuesday’s New York open and there was further selling at the cash open with the 10-year increasing to near 2.40%. Equity markets held firm with significant net gains and the dollar posted fresh highs close to 121.00 before a limited correction. 

San Francisco Fed President Daly stated that policy-supported demand and fragile supply chains was a recipe for inflation which is too high. She added that it is time to get back to a neutral monetary policy and looking though the Fed will need to go over neutral.

Cleveland head Mester stated that front loading Fed rate hikes is appealing and that raising rates to around 2.5% is appropriate this year with further rate hikes next year. She added that she thinks a 50 basis-point increase is likely at some meetings. The dollar retreated to 120.75 later in the day amid pressure for a significant correction. There was another lockdown in the Chinese industrial city of Tangshan, but yield trends were dominant with the dollar just above 121.0 on Wednesday.




The UK government borrowing data was notably worse than expected with underlying upward pressure on spending while debt interest payments increased to a record high. There were still expectations that Chancellor Sunak would look to provide a fiscal package in his spring statement to ease the impact of the surge in energy prices.

The UK CBI industrial orders index strengthened to 26 for March from 20 previously and above consensus forecasts of 16. Companies remained optimistic over the outlook and there were further inflation pressures with the balance of manufacturers expecting to raise prices at a record high since the survey started in 1975.

Sterling was able to secure further net gains ahead of Tuesday’s New York open with gains in equity markets providing support. There were also expectations that the combination of higher inflation and fiscal boost would lead to further interest rate increases by the Bank of England.

Sterling posted notable gains against the dollar with a peak close to 1.3300 and the Euro retreated sharply to near 0.8300.

The deal to drop US tariffs on UK steel and aluminium exports helped underpin Sterling sentiment. The headline UK CPI inflation rate jumped to a 29-year high of 6.2% from 5.5% and above expectations of 5.9% with the core rate at 4.3%. Sterling held around 1.3280 against the dollar with the Euro around 0.8310.




The Swiss franc was little changed on Tuesday and again out-performed the yen as the currency was resilient despite very low yields. There were still expectations that the franc would be seen as a European safe-haven given the war in Ukraine.

The Euro settled little changed around 1.0280 with the dollar dipping to lows around 0.9315 before a slight recovery. Markets expect the National Bank to hold interest rates at -0.75% at this week’s policy meeting with the guidance and rhetoric watched closely. The franc edged lower on Wednesday with the Euro above 1.0300.


Technical Levels 

Today's Calendar 



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