Inflation now scares the EUR, oil recovers

Inflation in the Euro Area sets a new record in March, heightening risks of stagflation – Photo: Shutterstock

The euro is under pressure as geopolitical tensions between Russia and Ukraine escalate, and after the Euro Area consumer price index hit its highest ever reading this morning – 7.5% year on year in March, much above predictions of a 6.6% rise.

Inflation is now causing increasing concerns and casting a shadow of stagflation over the European continent. Crude oil is up again above $100 a barrel this morning after Russia stated overnight that Ukraine launched a cross-border strike, damaging an oil storage complex in Belgorod.

Vladimir Putin signed a decree yesterday that establishes the rules for exchanging Russian natural gas with so-called hostile governments, forcing buyers to open a ruble-based account in a Russian bank, while OPEC+ decided to boost its oil output by 430,000 barrels per day in May, as scheduled.

In the United States, President Joe Biden announced an unprecedented release of 180 million barrels from the country’s strategic oil reserves between May and October, urging allies to follow suit and the US oil sector to ramp up output further.

Yesterday was a risk-off day, with the US stock market closing lower, dragging risk aversion in high-beta currencies such as the New Zealand dollar (NZD). European Union officials also warned China that supporting the Russian invasion could jeopardize its global position.

Meanwhile, the inversion of the US curve is back under observation, with the spread between 10- and 2-year Treasury just 2 basis points away.

Today, the market will focus on non-farm payrolls in the United States for insight into the labor market’s development in March, with the consensus expecting a 490,000 gain. The March ISM manufacturing index will also be announced, with the consensus predicting an increase to 59 points.

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Forex markets today – April 1, 2022

  • In London’s morning trade, the US Dollar Index (DXY) traded at 98.5, up by 0.2% on the day. The euro (EUR) fell to $1.105, down 0.2% today, after weakening as much as 0.8% yesterday. The British pound (GBP) was unchanged at $1.313.
  • Low-yielding safe-haven currencies were lower due to rising US Treasury yields. The Japanese yen (JPY) fell 0.6%, while the Swiss franc (CHF) was 0.2% lower.
  • Oil-linked currencies, such as the Canadian dollar (CAD) and the Norwegian krone (NOK) are steady.
  • The commodity-sensitive Australian dollar (AUD) was the outperformer of the day, up by 0.4%, as traders anticipate a potential hawkish move by the Reserve Bank of Australia next week. The high-beta New Zealand dollar (NZD) remains subdued, down 0.1% today after slipping 0.6% yesterday.
  • Central Eastern European (CEE) currencies, such as Polish zloty (PLN), Hungarian forint (HUF) and Czech koruna (CZK) are unchanged vis-à-vis the euro.
  • Emerging market (EM) currencies were mostly flat. The South African rand (ZAR) and the Mexican peso (MXN) held steady against the US dollar. In Asia, both the Korean won (KRW) and the Chinese yuan (CNH) slipped by 0.2%. The Turkish lira (TRY) was flat.

Major currencies: Top risers and fallers today – 1 April 2022

A forex table that compares nine major currencies against each other, including USD, EUR, GBY, JPY, CHF, AUD, NZD, CAD and NOKMajor currencies: Today’s top risers and fallers, 1 April 2022, 11:30 UTC – Credit: Capital.com

Forex market heatmap – 1 April 2022

A forex table showing the performance of US dollar and the euro against other currenciesForex market heatmap as of 1 April 2022, 11:30 UTC – Credit: Capital.com

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