Markets Report - 28 April 2022

A daily breakdown of the markets for the 28th April 2022, provided to you by Sterlex.

🇪🇺💶For today, Germany and Spanish CPI figures for April will be eyed by market participants ahead of tomorrow’s GDP and CPI figures from the euro area. While for Poland, some inventories and other sources of energy production could help mitigate the impact, the fear around the euro is building up as markets weigh the risk of supplies being cut off to more and bigger economies in the eurozone itself. The euro is tanking along with other European periphery currencies following a further intensification of Europe’s energy shock, labelled as ‘Putinflation’ by Poland’s Prime Minister after both Poland and Bulgaria were cut off from Russian gas supplies. The Financial Times reported this morning that some German and Italian companies are considering setting up ruble accounts with Gazprombank in order to secure gas. EURPLN has therefore remained stable, while both currencies have fallen substantially against the US dollar. Russia took this step as Poland and Bulgaria refused to meet Russia’s demand to pay in rubles as a way of circumventing sanctions. The developments leave EURUSD highly vulnerable as markets try to gauge the growth shock this brings to the euro area.

🇬🇧💷🌍With GBPUSD sitting at multi-year lows, and the Bank of England still expected to hike rates, the pound could start to bounce here as it breaks out of the “poor performer” group that largely consists of low-yielding currencies. In lieu of any idiosyncratic drivers, the pound remains at the mercy of broader market conditions, however, its bounce this morning from July 2020 lows against the dollar is notable as it comes without any major UK specific headlines. The pound continued to sit under pressure throughout yesterday’s session as market favouritism for the US dollar resumed.

🇺🇸 🏦With growth and financial stability considerations more acute in other G10 markets, expectations of higher US yields leaves the dollar in the driving seat for FX markets at the moment. Meanwhile, volatile bond and equity market conditions are only furthering inflows into the dollar as markets seek refuge from the tentative growth and high inflation environment. Today, markets will get a brief look at how strong growth conditions are in the US with the advanced first quarter GDP reading at 13:30 BST. FX traders seemingly have eyes only for the dollar at the moment, with the DXY hitting levels last seen in January 2017 overnight after the Bank of Japan meeting sent the yen over a percentage point lower and sparked a renewed wave of dollar buying. The economy is expected to expand by 1% quarter-on-quarter in annualised terms.