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The April Euro-zone Sentix investor confidence index dipped further to -18.0 from -7.0 previously which was weaker than the -9.2 for March and the weakest since June 2020. Overall confidence in the economic outlook remained fragile, especially given uncertainty over energy prices and risk of disruption to supplies.

The German banking lobby BDB stated that the economy would face a steep recession if Russian oil and gas were cut off.

The Euro edged lower during the European session and dipped back below the 1.1000 level against the US dollar as the latest developments in Ukraine sapped support. The evidence of war crimes by Russian forces retreating from the Kyiv area increased expectations that peace negotiations would be even more difficult in the short term. There was also increased pressure for further sanctions against Russia and increased concerns over the risk of disruption to energy supplies to the EU.

In this context, there were further concerns over underlying vulnerability in the economy which undermined the currency.

EU council President Michel stated that additional measures were on their way and EU ambassadors are scheduled to meet on Wednesday.

With no positive developments surrounding Ukraine, the Euro continued to edge lower and retreated to lows near 1.0960 against the dollar.

The Euro was unable to recover on Tuesday with further unease over the Ukraine situation. As well as the allegations of war crimes, there were also concerns that financial pressure on Russia would lead to retaliation and risk a jump in energy prices while Fed expectations underpinned the US currency.




US factory orders declined 0.5% for March following a 1.5% gain the previous month which was in line with consensus forecasts. After peaking around 2.50%, the US 2-year yield edged lower during the day which had some impact in curbing further selling, although overall demand for the Japanese currency remained weak, especially with Wall Street indices posting further gains. The dollar peaked just below 123.0 before a retreat to 122.75 later in New York as the retreat in US yields curbed buying.

There were no significant comments on monetary policy from Federal Reserve officials during Monday, but markets will monitor comments from Governor Brainard on Tuesday for further evidence on the potential Fed decision at the May policy meeting. Failure to push back against market expectations would be a clear signal that a 0.50% rate hike is likely to be sanctioned at the May policy meeting.

Chinese markets remained closed for a holiday on Tuesday, but markets still fretted over the impact of a lockdown in Shanghai. There were concerns that the outbreak was more serious than being reported which could cause further disruption to global supply chains and reinforce inflation pressures.

Bank of Japan Governor Kuroda stated that recent forex moves have been somewhat rapid and hinted that there could be intervention to slow the decline, although he stated that it was hard to gauge the impact. The comments stifled potential yen selling with the dollar retreating to near 122.50.




In comments on Monday, Bank of England Deputy Governor Cunliiffe stated that the Ukraine crisis will intensify and prolong the surge in inflation and tighten the squeeze on household incomes. He added that companies do not have the same bargaining power as in the 1970’s and he was not convinced that there was a need to lean heavily and constantly against an embedding of an inflationary mind-set. Cunliffe appears unlikely to back aggressive tightening from current levels.

The overall rhetoric was broadly dovish, although this would have been expected to some extent given that he voted against the March rate hike. Sterling was resilient despite the dovish stance with support below the 1.3100 level against the dollar and consolidation just above this level at the European close.

Equity markets made limited headway which limited the potential for further selling and the Euro retreated sharply to around 0.8365.

Sterling held above 1.3100 against the dollar on Tuesday and around 1.3125 with markets continuing to monitor Bank of England rhetoric and global risk conditions.




Total Swiss sight deposits increased to CHF737.2bn in the latest week from CHF731.5bn previously and the notable increase suggested that the National Bank had been more active in intervening to weaken the Swiss currency.

The franc posted gains during the day, however, especially with further reservations over the Ukraine situation. The Euro retreated to lows below 1.0160 while the dollar was unable to make significant headway. The franc continued to resist selling on Tuesday with the dollar trading around 0.9265.


Technical Levels




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