April 1, 2022

“Oil prices are easing off as President Joe Biden announced a release of 1 million barrels per day for six months in an attempt to tackle sharp rise in energy prices – Brent crude fell more than 5% to $105.50 as of yesterday.”

Sam Cornford, Partner – Head of Trading

Main Headlines

President Joe Biden launched the largest release ever from the US emergency oil reserve and challenged oil companies to drill more in an attempt to bring down gasoline prices that have soared during Russia’s war with Ukraine. The United States will release 1 million barrels per day of crude oil for six months from the Strategic Petroleum Reserve, Biden said. Biden’s 180-million-barrel release is equivalent to about two days of global demand and marks the third time Washington has tapped the SPR in the past six months. It will more than cover oil exports to the United States from Russia, which Biden banned this month. Nevertheless, the release will fall short of a loss of about 3 million bpd of Russian oil which the International Energy Agency estimates will be lost to global markets amid Western sanctions and as global buyers avoid the oil.

More than 20 million UK households are facing a 54 per cent increase in energy bills from today and benefits will fall in real terms as economic data show surging inflation hit consumer spending even before the effects of Russia’s invasion of Ukraine were felt. Energy bills for the households whose payments are capped will rise by an average of £693 to £1,971 a year from April. Universal credit, the main welfare payment, and the state pension are being increased by just 3.1 per cent. The changes come as official data showed a fall in households’ real income, shrinking savings and lower growth in spending at the end of 2021. Surging prices will contribute to households’ real income falling this year at the fastest pace since records began in the 1950s, as government support measures have offset only around a third of the fall in living standards.

GBP

Sterling is stronger against euro and weaker against the dollar this morning. Websites for some of Britain’s biggest energy companies crashed on Thursday as consumers worried about the escalating cost of living crisis rushed to submit gas and electricity readings ahead of a 54 per cent rise in prices from April 1. UK civil servants will feel the full force of the squeeze on living standards, after ministers set guidance that will leave them with below-inflation pay awards averaging just 2 per cent next year. Water companies in England face a clampdown on dumping raw sewage into rivers and the sea, as the latest official data showed there were more than 370,000 spillages last year. Britain announced sanctions on 14 more Russian entities and people yesterday, saying it was targeting those who push out President Vladimir Putin’s “fake news and narratives.”

EUR

Euro is weaker than most major currencies in the early morning trade. The European Union will seek China’s assurances that it won’t assist Russia in circumventing economic sanctions levelled over the invasion of Ukraine at an annual summit Friday. EU officials say they will also look for signs Beijing is willing to cooperate on bringing an end to the war at the virtual meeting. Meanwhile, European buyers of Russian gas faced a deadline to start paying in roubles on Friday, while negotiations aimed at ending the five-week war were set to resume even as Ukraine braced for further attacks in the south and east. Russia’s central bank said on Friday it was softening restrictions on foreign fund transfers for individuals for a six-month period. The bank said the measures, which raise an earlier limit on funds that can be transferred abroad, did not apply to residents and non-residents from countries that had imposed sanctions against Russia over Ukraine.

USD

The dollar is well bid against most major currencies overnight. US job growth likely continued at a brisk clip in March, with the unemployment rate falling to a new two-year low of 3.7% and wages re-accelerating, which would position the Federal Reserve to raise interest rates by a hefty 50 basis points in May. US president Joe Biden will issue a directive, authorizing the use of the Defense Production Act to secure American production of critical materials to bolster our clean energy economy by reducing our reliance on China and other countries for the minerals and materials that will power our clean energy future. Federal health officials are dropping the warning they have attached to cruising since the beginning of the pandemic, leaving it up to vacationers to decide whether they feel safe getting on a ship.

Markets

European stocks and US equity futures rose slightly as investors evaluated the economic outlook amid moderating oil prices, tightening Federal Reserve monetary policy and Russia’s war in Ukraine. Stocks are coming off their worst quarter since the pandemic bear market. Energy shares fell as oil retreated on a move by the US to release 1 million barrels a day for six months from reserves to tackle rising costs. Government bond yields rose and the curve between two-year and 10-year Treasuries yields remained close to inverting, a pattern that signals worries about an economic downturn if the Fed uses aggressive interest-rate hikes to damp high inflation. Attention will turn to US payrolls figures later today as traders assess the strength of the US economy and the case for Fed tightening, reinforcing a divergence with Japan’s dovish monetary settings that’s weighed on the latter’s currency.

Main Economic Data/Central Banks/Government (All Times CET)

8:30 a.m.: Switzerland March CPI
9:45 a.m.: Italy March manufacturing PMI
9:50 a.m.: France March manufacturing PMI
9:55 a.m.: Germany March manufacturing PMI
10:00 a.m.: Euro-Area March manufacturing PMI
10:00 a.m.: Poland March CPI
10:30 a.m.: U.K. March manufacturing PMI
10:30 a.m.: ECB’s Centeno speaks
11:00 a.m.: Euro-Area March CPI
11:45 a.m.: ECB’s De Cos speaks
1:00 p.m.: ECB’s Makhlouf speaks
2:30 p.m.: U.S. March jobs report
2:45 p.m.: U.S. March manufacturing PMI
3:05 p.m.: Fed’s Evans speaks
4:00 p.m. U.S. Feb. construction spending
ECB’s Schnabel, Knot speak
EU-China virtual summit

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