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The ECB made no changes to monetary policy at the April meeting with the main refi rate held at 0.0% which was in line with consensus forecasts.

As far as the economy is concerned, President Lagarde stated that downside risks to the economy have increased substantially while inflation risks were higher.

On a longer-term view, however, the bank expects inflation will gradually move back to target and possibly below.

Lagarde stated that the bank was sticking to its planned sequence and complete asset purchases first which is likely to be during the third quarter. She added that it will start raising rates some time afterwards which could be a week or several months. In this context, the June meeting will be pivotal. If this sequencing remains in place, the bank could raise rates as early as July or delay this until much later in the year.

Markets had priced in a more hawkish stance and there was a downgrading of market expectations surrounding ECB rate hikes which sapped support for the Euro.

The Euro slumped to 23-month lows near 1.0750 before a bounce back above 1.0800 as overall yield spreads continued to underpin the dollar.

There was slightly increased confidence in the French election with opinion polls indicating that President Macron had a lead of close to 10% over National Front leader Le Pen. The Euro, however, was also undermined by a fresh increase in energy prices and fears over a prolonged conflict in the Ukraine. Late in the day, Ukraine reported that the Russian offensive in the Donbas had started The Euro was unable to gain significant relief and the Euro dipped back to lows just below 1.0770. Narrow ranges prevailed on Tuesday, but the dollar maintained an overall robust tone on yield spreads with little net change for the Euro.




Bank of Japan Governor Kuroda stepped-up warnings over a slide in the yen with comments that recent moves had been quite sharp and would potentially have a negative impact on companies. The yen, however, remained vulnerable given the overall move in yield spreads. CFTC data recorded a further increase in short yen contracts to a 4-year high close to 111,000. The yen, however, remained under heavy selling pressure and the dollar strengthened to a 19-year high close to 127.0.

The New York Empire manufacturing survey strengthened sharply to 24.6 for April from -11.8 previously and well above consensus forecasts of 1.0. There was a slight easing in the rate of increase of prices received, but the prices paid index strengthened to a fresh record high. There was, however, a sharp weakening in confidence surrounding the outlook with expectations surrounding business conditions sliding to the lowest level since the second quarter of 2020.

US Treasuries came under heavy selling pressure with further selling ahead of Monday’s New York open with the 10-year yield at the highest level since December 2018. There was further verbal intervention from Japanese officials with finance minister Suzuki stating that damage from a weakening yen is greater than the benefits, but the comments had little impact and there was further sustained selling with the dollar surging to a fresh 19-year high above 128.0 and the Euro also jumped to 138.0




Sterling overall has been held in relatively tight ranges, especially with UK markets closed on Friday and Monday. Overall yield spreads remained a key element in global currency markets with the US dollar remaining under pressure against the dollar while the Euro remained under pressure.

Sterling did find support close to 1.3000 against the dollar while the Euro dipped below the 0.8300 level with low around 0.8275 amid wider Euro losses.

The latest CFTC data recorded a further increase in short, non-commercial Sterling positions to over 53,000 contracts in the latest week from below 42,000 previously. This was the largest short position since late 2021 and the second-highest short position since November 2019. The overall positioning will maintain the potential for a Sterling rebound if there is a shift in sentiment. Markets will continue to monitor political developments with Prime Minister Johnson under further political pressure and due to make a statement to the House of Commons on Tuesday. Sterling edged below 1.3000 in early Europe with the Euro around 0.8285 as UK markets re-opened.   




The Euro was resilient against the Swiss franc following the ECB policy meeting and the franc has tended to lose ground given the focus on overall yield spreads. Expectations of higher global yields continued to sap net support for the Swiss currency.

Overall, the Euro secured a net gain to 1.0180 on Monday with the dollar posting net gains to 0.9450. The franc lost some ground on Tuesday as yield trends continued to dominate, although it continued to out-perform the Japanese yen with the dollar at 11-month highs just above 0.9450.

Technical Levels 




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