Market Update 25th March 2022

By Alfie Warman

Good morning from CCM for your final update of the week on this beautiful Friday morning.

The relatively tight margins seen this week have remained into Friday amid a mixed sentiment in the market. A strong stance was taken at the NATO summit, with President Biden insisting there will be a response to any nuclear activity from the Russian forces. Four new ‘battle groups’ have now been formed to strengthen Eastern defences, with alliances across Bulgaria, Hungary, Romania, and Slovakia as part of its response to Russia's unprovoked invasion of Ukraine. The Russians warned that NATO’s support of Ukraine however is to have, and has already had, damning consequences.

A slight DXY retreat despite maintaining some demand has weighed on GBPUSD today as a major intraday slide has occurred for the cable. Following an early uptick to the 1.3225 area, a slump to the 1.317 territory. GBP continues to suffer from the BoE’s switch to a soft stance regarding further interest rate hikes and macroeconomic data from the UK has fuelled further support of this take. As well as the PMI manufacturing data reported yesterday, monthly Retail Sales declined by 0.3% in February and sales excluding fuel fell 0.7%. The differing dynamic between the two respective approaches to interest rates has forced the cable lower as the Fed is gaining support for a 50bps hike in the May meeting.

EURUSD has retreated from daily highs at 1.103 to just above 1.10 at the time of writing. The PMI data report on Thursday had negative implications for the Euro and remains relevant for investors as USD has regained attraction approaching lunchtime. The EZ private sector's business activity has lost growth momentum in early March due to supply chain disruptions and rising energy costs. We hear from New York Fed President John Williams and Fed Governor Christopher Waller later and unless they carry a staggeringly dovish tone, USD will remain strong into the weekend.?

GBPEUR has crumbled amongst the souring UK data. The shift in market mood has recaptured USD safe haven investment but GBP attention wears thin for now amid the dovish outlook. Trading well below yesterday's 1.20 at 1.197 territory, the delay on the Russian oil embargo has helped support the Euro. European Union (EU) leaders' summit failed to settle on the decision of banning Russian oil?with immediate effect. The consequences of an immediate prohibition would be brutal for the EZ so while that has been held off for now EUR can apply some pressure to Sterling.?

Another week of twists and turns, and it won’t slow down into next week as the clocks change and the countdown to summer continues. That’s when we’ll see you next, and as ever, we wish you a wonderful weekend.