Morning Report

April 14, 2022

“Whilst the European Central Bank’s governing council meeting today is not expected to involve any major decisions, euro volatility suggests that there could be relatively big swings – overnight hedging costs in euro-dollar reached their third-highest levels since December 2020.”

Sam Cornford, Partner – Head of Trading

Main Headlines

US President Joe Biden announced an additional $800 million in military assistance to Ukraine yesterday, expanding the scope of the systems provided to include heavy artillery ahead of a wider Russian assault expected in eastern Ukraine. The package, which brings the total military aid since Russian forces invaded in February to more than $2.5 billion, includes artillery systems, artillery rounds, armoured personnel carriers and unmanned coastal defense boats, Biden said in a statement, after a phone call with Ukrainian President Volodymyr Zelensky. Biden said he had also approved the transfer of additional helicopters, saying equipment provided to Ukraine “has been critical” as it confronts the invasion. Despite public support in the US for military aid for Ukraine, pessimism is clearly dragging on Americans’ opinions of President Joe Biden – the president’s approval rating sank to a new low of just 38%, with 53% disapproving.

Boris Johnson suffered a fresh blow over the “partygate” scandal on Wednesday when his justice minister quit over “repeated rule-breaking and breaches of criminal law” in Downing Street. Lord David Wolfson said he could not remain a minister following the revelations about Number 10 parties held during coronavirus lockdowns. Wolfson’s resignation came as senior Tories expressed concern the scandal has much further to run, with the prime minister facing the possibility of three more fines, over Downing Street parties, and the risk of photographs of gatherings being leaked to the media. Tory MP Nigel Mills has become the first backbencher to call for Boris Johnson to quit after he was fined over partygate. However, some other Tories who said in the past that they had lost confidence in Mr Johnson after revelations about parties in Downing Street have since rallied around their leader, saying he should stay, at least for now, as the war in Ukraine rages.


Sterling is stronger against the dollar and weaker against the euro this morning. UK Home Secretary Priti Patel’s plans to send some asylum seekers to Rwanda for processing were described as “evil”, as ministers faced a backlash over their latest attempt to stem the flow of illegal migrants crossing the Channel. The move will see people seeking sanctuary in the UK sent more than 4,000 miles to the African country. Fears of a Russian escalation have led to reports suggesting an air force base in the UK is once again going to be storing US nuclear weapons. But disarmament campaigners warned of “a further undermining of prospects for global peace” and that it “will increase global tensions and put Britain on the front line in a NATO/Russia war.” Elsewhere, the Law Officers’ Department of Jersey, which is a self-governing British Crown Dependency in the Channel Islands, have said that police have searched properties associated with Roman Abramovich and the Royal Court of Jersey has imposed a formal freezing order on $7 billion worth of assets associated with the billionaire.


The euro is well bid against most major currencies overnight. Among the last policy announcements expected before the Easter break is the outcome of the European Central Bank’s governing council meeting today, which may shed further light on how the Frankfurt-based bank seeks to reconcile apparently clashing priorities. They will explore the conundrum of helping countries borrow at affordable rates while also keeping the lid on inflation. French President Emmanuel Macron declined Wednesday to repeat President Joe Biden’s accusation that Russia was carrying out “genocide” against Ukrainians, warning that verbal escalations would not help end the war. In contrast, Polish President Andrzej Duda called the war in Ukraine “terrorism” – saying those who committed crimes must be brought to justice and that that must extend to those who gave the orders. Finland will take a decision about whether to apply to join the US-led NATO alliance in the next few weeks, underlining a shift in security perspectives since Russia’s invasion of Ukraine.


The dollar is weaker than most major currencies in the early morning trade. JPMorgan Chase said the US economy remains on solid footing in the short term but warned of heightened longer-term risks due to inflation and the Ukraine war as it reported lower quarterly profits. Executives from the giant bank said households and businesses generally remained in good shape amid a tightening labour market. But higher consumer prices, the Ukraine war and the shifts in Federal Reserve policy have together slightly raised the recession risk. Federal Reserve Governor Christopher Waller has however claimed that the US economy would be able to handle aggressive policy tightening, as he reiterated support for raising interest rates by a half point next month. Waller said that it is “completely feasible” the Fed can slow demand without triggering a recession because the economy is so strong. But Fed chair Jay Powell has also warned that, “financial coverage is usually stated to be a blunt instrument, not able to surgical precision.”


Stocks and government bonds in Europe were steady as investors await the central bank’s meeting later today for cues on the path of monetary policy. Europe’s Stoxx 600 and US equity futures were little changed, while travel and technology shares gained. Asian stocks rose after China again indicated looser monetary policy is on the way. Attention is turning to the European Central Bank, which is set to maintain its speedier withdrawal of stimulus. Investors are also looking to the corporate earnings season amid concerns that high inflation and supply chain disruptions are hurting profit margins. The yen bounced from a two-decade low against the dollar. The greenback was little changed after snapping its longest winning streak since 2020. Oil slipped. China is expected to cut a key policy interest rate for the second time this year on Friday and reduce the reserve requirement ratio soon. South Korea raised its key interest rate and Singapore further tightened policy, spurring advances in their currencies.

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

7:00 a.m.: Finland March CPI
8:00 a.m.: Sweden March CPI
8:30 a.m.: Switzerland March Producer & Import Prices
9:00 a.m.: Hungary One-Week Deposit Rate
10:30 a.m.: BOE Bank Liabilities/Credit Conditions Surveys
12:00 p.m.: Ireland Feb. Trade Balance
1:00 p.m.: Ukraine Key Rate
1:00 p.m.: Turkey One-Week Repo Rate
1:45 p.m.: ECB Rate Decision
2:30 p.m.: ECB’s Lagarde speaks
2:30 p.m.: US weekly jobless claims, March retail sales
7:00 p.m.: Baker Hughes US rig count


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