Morning Report

April 28, 2022

“The dollar index is nearing heights not seen in two decades, whilst the euro hit a five-year low against the dollar – further heightening Europe’s economic troubles as the cost of energy imports priced in dollars increases, whilst natural gas prices have soared in Europe due to Russian sanctions.”

Sam Cornford, Partner – Head of Trading

Main Headlines

The dollar was nearing heights not seen in two decades on Thursday as the energy crisis in Europe hamstrung the euro. The dollar index reached a five-year top of 103.28, whilst the euro hit a five-year low of $1.0515 – representing a 4.6% drop in April and putting it on track for its worst month since early 2015. The slide only adds to Europe’s economic troubles as it raises the cost of energy priced in dollars, just as natural gas costs soar on Russia’s move to cut off Poland and Bulgaria. This could make the European Central Bank reluctant to tighten aggressively, leaving it lagging far behind the Federal Reserve. Markets are wagering the Fed will hike by 50 basis points in May, June, and July, and ultimately lift rates to around 3.0% by the end of the year. The ECB is seen maybe reaching 0.5% by Christmas. One possible pothole for the dollar will be data on US gross domestic product due later today.

Russia has banned 287 British members of Parliament from entering the country and accused them of fuelling “Russophobic hysteria” in Britain, drawing a defiant response from Prime Minister Boris Johnson, and a plethora of sarcasm from other MPs. In response to Russia’s invasion of Ukraine Britain has, alongside allies, imposed far-reaching sanctions against Moscow’s wealthy oligarchs and political elites, including President Vladimir Putin. Asked about the move during Prime Minister’s Questions, Mr Johnson told MPs: “It’s no disrespect to those who haven’t been sanctioned when I say that all those 287 should regard it as a badge of honour – what we will do is keep up our robust and principled support for the Ukrainian people and their right to protect their lives, their families, and to defend themselves.” Ex-Tory minister Andrew Murrison said he was “delighted” to be on the list, while former Brexit secretary David Davis joked “how ever will I cope?”.


Sterling is stronger against the euro and weaker against the dollar this morning. The Bank of England next week will try to walk what Governor Andrew Bailey calls a “very tight line” between tackling inflation speeding way above the BoE’s target and not triggering a recession. The BoE is expected to raise interest rates at a fourth meeting in a row on the 5th of May, the first time it has done that since 1997. Households faced a 54% hike in energy costs this month, along with record-high inflation hitting their pockets. However, Chancellor Rishi Sunak has said it would be “silly” to provide more support to tackle rising energy bills now, before knowing what will happen to prices in the autumn – a statement described as “out of touch” and “tone deaf in the middle of a cost-of-living emergency”. The British government’s ethics advisor has cleared Rishi Sunak of breaching ministerial codes after investigating his family’s tax affairs and ruled that there was no conflict of interest in Sunak holding a US permanent resident Green Card, which he has since given up.


The euro is weaker than most major currencies in the early morning trade. After the announcement yesterday that Russia has blocked gas deliveries to Poland and Bulgaria, the EU has resolved to using reverse flows, alternative supplies, and storage to help the two countries. The European Commission insisted that other countries hold firm rather than cave in to Russian demands. However, some of Europe’s largest energy companies are making arrangements to comply with a new payment system for Russian gas sought by the Kremlin, which critics say will undercut EU sanctions, threaten the bloc’s unity, and deliver billions in critical cash to Russia’s economy. Negotiations between utilities and Gazprom, the Russian state-controlled gas supplier, have intensified as payment deadlines approach, they said. The European Commission proposed yesterday a one-year suspension of import duties on all Ukrainian goods not covered by an existing free trade deal to help the country’s economy during the war with Russia.


The dollar is well bid against most major currencies overnight. US President Joe Biden will travel to South Korea and Japan in May, the White House announced yesterday, paying a visit to two of Washington’s main Asian allies amid tensions with rival China and regional foe North Korea. The Biden administration has repeatedly characterised the Asia-Pacific region, and particularly the rise of communist China, as the number one strategic issue for the United States. China and the United States have long been at loggerheads over trade, human rights, and political policy. The Biden administration is looking into claims that Yangtze Memory Technologies Co, a Chinese semiconductor maker, has supplied Huawei with chips. A violation of US export controls would further increase tensions between the two economic superpowers. As per a new US SEC filing, Elon Musk will have to pay a $1 billion termination fee if he doesn’t go through with his $44 billion acquisition of Twitter.


European stocks rallied with US equity futures Thursday after upbeat earnings bolstered the bull case for the economy and markets, dispelling growth fears for now. The Stoxx Europe 600 Index rose more than 1% with every industry group in the green. Big individual contributors included TotalEnergies SE, Glencore Plc and Capgemini SE, which all posted gains on buoyant earnings. Futures on the S&P 500 also gained more than 1%.  Contracts on the technology-heavy Nasdaq 100 jumped more than 2%, paced by gains in Meta Platforms Inc. after Facebook’s main social network added more users than projected. Thursday’s relief rally punctuates a week of nerves marked by China’s struggle to suppress Covid, Russia’s war in Ukraine and worries that Federal Reserve monetary tightening may tip the US economy into a recession. Treasuries rose while oil edged lower. Natural gas prices in Europe declined following two days of gains as buyers considered options to keep getting supply from Russia without violating sanctions.

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

8:00 a.m.: Sweden March retail sales
9:00 a.m.: Sweden April economic tendency survey
9:00 a.m.: Spain 1Q unemployment report, April CPI
9:00 a.m.: Hungary one-week deposit rate
9:00 a.m.: ECB’s de Guindos speaks
9:30 a.m.: Riksbank interest rate decision
10:00 a.m.: ECB publishes its economic bulletin
10:00 a.m.: Italy April consumer confidence index, economic sentiment
10:15 a.m.: ECB’s Wunsch speaks
10:15 a.m.: Norges Bank governor speaks at parliamentary hearing
11:00 a.m.: Riksbank press conference on policy decision
12:00 p.m.: France 1Q total jobseekers
2:00 p.m.: Germany April CPI
2:30 p.m.: US weekly jobless claims, 1Q GDP
Gender Balance Index Report by the OMFIF Sustainable Policy Institute.

Corporate Events

Earnings include Barclays, Linde, Sanofi, TotalEnergies, Nordea Bank, DNB Bank, Nokia, Twitter, Vedanta, Mastercard, Eli Lilly, Merck & Co., Thermo Fisher, Amazon, Apple.


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