Daily Analysis Report 14 Mar '2022

Mar 14, 2022


During the Asian session, the European currency exhibits mixed trading characteristics against the US dollar, stabilising near 1.0900 in anticipation of new movement factors. Last week’s trading closed with an active two-day fall, nearly cancelling the instrument’s attempts to gain on Tuesday and Wednesday. The euro was boosted by the European Central Bank’s (ECB) rhetoric, which stated that the quantitative easing (QE) programme would be curtailed sooner than expected, allowing the regulator to begin a full-fledged tightening of monetary policy through an increase in interest rates by the end of the year. As a result, the euro is under pressure as the war in Ukraine deepens, with Russian troops continuing to execute a special military operation. Western countries are imposing more and more new sanctions against firms and individuals. The United States has already barred importing Russian oil, gas, and other energy items, and Europe, which is more reliant on exports, is likely to follow suit. 


During the morning session, the British pound was downtrending against the US dollar. The pound is pushing 1.3000 for a break, which would bring it back to new lows not seen since November 2020. As investors assess the implications of the present turmoil in Eastern Europe on the rate of global economic recovery, market buying activity remains modest. Russia is currently conducting a special military campaign in Ukraine, putting Russian business under strain. Throughout Europe, particularly in the United Kingdom, a trend has emerged toward the gradual desertion of Russian energy sources. A substantial block of macroeconomic information from the United Kingdom provided negligible support for the instrument at the close of the week. After a 0.2 percent drop in December, the UK GDP increased by 0.8 percent in January 2022. An gain of 0.2 percent was forecast by investors. Industrial Production increased by 0.7 percent MoM and 2.3 percent YoY over the same period, much higher than market expectations of 0.1 percent MoM and 1.9 percent YoY, respectively. 


This week, the New Zealand dollar is slightly down against the US dollar, attempting to consolidate below the psychological support level of 0.6800. The continued demand for safe assets as the geopolitical situation in Europe worsens exerts pressure on the instrument’s position. Furthermore, the market is concerned about the steep rise in global energy prices and the possibility of additional deterioration as Western countries abandon Russian oil and gas. Expectations that the US Federal Reserve would begin a cycle of tightening monetary policy this week give more support for the US currency. According to current market predictions, the rate will be raised by 25 basis points at the regulator’s meeting on Wednesday. Macroeconomic data from New Zealand and the United States were mixed when released on Friday. Thus, the Manufacturing PMI in New Zealand increased slightly from 52.3 to 53.6 points in February, falling short of experts’ expectations of 54.5 points. At the same time, after growing by 2.7 percent in January, the Food Price Index surprisingly decreased by 0.1 percent in February. The market anticipated a 1.3 percent drop in the index. In turn, data from the United States disappointed investors, with the Consumer Confidence Index from the University of Michigan dropping from 62.8 to 59.7 points in March, while the market might see a decrease by 61.7 points. 


In Asian trading, the US dollar has made modest gains versus the Japanese yen, testing 117.80 for a breakout. The USD/JPY is currently nearing new highs not seen since January 2017, indicating that more gains are likely ahead of the US Federal Reserve’s interest rate meeting on Wednesday. The market anticipates a rate hike of 25 basis points and a general tightening of language in response to rising prices and a worse economic outlook. Despite a record number of sanctions put on Russia’s economy in the last two weeks, the geopolitical situation in the world remains highly volatile. Russia continues to execute a special military operation in Ukraine.On Friday, the Bank of Japan will meet to discuss interest rates. Analysts’ estimates do not indicate any changes in the Japanese regulator’s monetary policy vector; nonetheless, investors anticipate a steady tightening of its rhetoric. 


During the Asian session, gold prices fell moderately, building on the shaky corrective trend that emerged in the market on March 9, when the instrument was approaching record highs and the level of 2070.00. AS NEW DRIVERS DEVELOP, the XAU/USD pair is slowly trading below 2000 dollars per troy ounce. Gold is under pressure as the US dollar strengthens and predictions that the US Federal Reserve would raise interest rates on Wednesday. Market expectations are for a 25-basis-point rate hike, but a more aggressive tightening of monetary policy, including a modification in the rate adjustment plan for 2022, should not be ruled out.At the same time, due to the considerable dangers on the market, gold demand remains high. Despite the wave of sanctions that has struck Russia’s economy since the end of February, Russia continues to execute a special military operation in Ukraine.