Daily Market Commentary 31st March 2022

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The Ukraine situation continued to dominate markets, with hopes of a peace agreement, fading. Hopes were high, following the Russian agreement to pull back forces, from around the Capital Kiev.  The optimism was short lived, as the forces were re-deployed elsewhere, closer to the military action, such in the Donbass. Russians are content to continue to wage war, while negotiations continue, as part of the pressure. Germany and Austria are now warning of gas rationing, as they refuse to make payments for Russian gas, in roubles. The deadline was for the end of March and all G7 nations have refused Russia’s demands, to pay for gas in Russian roubles. If there is any disruption to gas supplies in Europe, especially heavily dependent Germany and Austria, Europe would be plunged into chaos.

The developments surrounding the sanctions are beginning to heavily impact currency markets, with particular attention being paid o the reserve status of the US Dollar. The Russians have been linking he Rouble to gold and thus oil and gas, undermining the support and questioning the value of the once mighty US Dollar. This has allowed the EUR to come roaring back, to trade 1.1150, while the Yen has regained ground to move to 121.80.

The falling reserve allowed further gains in the commodity currencies, with the NZD trading 0.6970, while the AUD looks to regain 0.7500. NZ Business Confidence was minus 41.9, accurately reflecting the parlous state of business sentiment, although it was an improvement on the disastrous previous number. German inflation is soaring, under the pressure of the sanctions and the energy crises, ballooning to 7.6%, while Spain has recorded a blow-out 9.8%! Sanctions imposed on Russia, are biting the authors of said sanctions, extremely hard and only adding to the European inflation crises.

The US ADP Jobs reports was broadly in line with expectations, adding 455,000 private sector jobs, as attention now turns to the much anticipated Non Farm Payrolls number, released Friday.

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