Daily Market Commentary 25th March 2022

Market focus was consumed by politics and the Ukrainian war, overnight. Global meetings between NATO, the European Council and G7 all took place overnight in Brussels, along with the ECB. They will probably be little of much import coming from these meetings, as most of time is spent making speeches and taking group photo’s and little is expected outside of window dressing on the existing sanctions. Most of the work for these meetings is done by officials behind the scenes, prior to the ‘grand occasion’, with the fine tuning done on the sidelines of the meetings. If NATO decided to intervene or escalate, it would have been signalled beforehand and any escalation would be a big surprise. Markets would react according to the intentions and signals, not the noise, as the war and sanctions are a huge negative to markets, especially European.

US equities surged overnight, once again, on the back of strong US employment and PMI numbers. The Fed’s warnings of 50 basis point rises in interest rates, is being largely ignored by markets overnight, while inflation remains the elephant in the room. Inflation will only snowball from already record levels and drive interest rates and costs higher. Energy and food supply issues are seriously damaging in the US and Europe, while other world economic zones (not directly involved) will not be immune. He EUR fell below 1.1000, while he Yen careered lower, to trade 122.30. The Bank of Japan has assured markets that Japan will not suffer ‘stagflation’, while the collapse in the Yen, is great for the export driven economy.

Commodity currencies have been boosted by the rising commodity prices, but the resurgent US Dollar has taken the shine off recent rallies. The NZD fell below 0.6950, while the AUD looks to test 0.7500, boosted by the strong commodities and demand.

All eyes remain on NATO, the EU/ECB and G7.