The start of the week sees a resurgence of economic and geopolitical risks in Europe, with some European nations pressing for tougher sanctions against Russia following weekend news of Russian forces carrying out executions on unarmed Ukrainian civilians.
In the forex market, the euro fell against the dollar in the European morning session, due to growth fears and widening interest rate differential between the US Federal Reserve and the European Central Bank (ECB). The EUR/USD pair is trading at 1.102, down 0.3% on the day.
Last Friday, the US labor market report saw a new fall in the unemployment rate and a rise in wages, reinforcing market expectations of a faster rate hike by the Fed. The market is now pricing with a probability of 70% a rise from 50 basis points in May.
On the negotiations front between Russia and Ukraine, the latest developments point towards a worsening and not an improvement in relations, with the Ukrainian government asking the International Criminal Court to look for evidence of alleged war crimes.
Meanwhile, crude oil prices continue to hover at around $100 per barrel for WTI and $105 for Brent, despite China extending the lockdown in Shanghai due to Covid-19 and after the US announced the plan to release 1 million barrels daily for 6 months from reserves . Commodity-linked currencies such as the Canadian dollar (CAD) and the Norwegian krone (NOK) are recovering in the crosses against the EUR.
There is no noteworthy data out today, but the ISM services index for the United States and the March Federal Open Market Committee minutes are scheduled this week, which could provide new information on the Fed’s balance sheet reduction program.
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Chart of the day: Will EUR/USD test the lower bound of the ascending channel?
Forex markets today – 4 April 2022
- In London’s morning trade, the US Dollar Index (DXY) traded at 98.67, up by 0.2% on the day. The euro (EUR) slipped to $1.102, down 0.3% today, after weakening by 0.1% on Friday. The British pound (GBP) was unchanged at $1.312.
- Low-yielding safe-haven currencies edged slightly lower as long-term US Treasury yields rose. The Japanese yen (JPY) fell 0.1%, while the Swiss franc (CHF) was 0.2% lower.
- Oil-linked currencies, such as the Canadian dollar (CAD) and the Norwegian krone (NOK) recovered with both gaining 0.2% versus the USD.
- The commodity-sensitive Australian dollar (AUD) was also 0.2% higher, while the high-beta New Zealand dollar (NZD) remained flat.
- Central Eastern European (CEE) currencies were mixed. The Polish zloty (PLN) and Czech koruna (CZK) were unchanged vis-à-vis the euro, while the Hungarian forint (HUF) slipped 0.3% today.
- Emerging market (EM) currencies were generally positive. Both the South African rand (ZAR) and the Korean won (KRW) climbed by 0.5%, while the Russian ruble (RUB) gained 0.3%, and now hovering at the same level before the start of the war in Ukraine. The Mexican peso (MXN) and the Chinese yuan (CNH) were stable, while the Turkish lira (TRY) fell 0.2%.