Crude Oil Finds Support

By the start of European trading on Monday, WTI had lost over 20% from its high of $80.96 on 7 March to a low of $64.36. The sell-off that intensified last week may well be giving way to a new buying impulse in oil. Oil is broadly back in long-term equilibrium, and it would take a significant shift in the supply/demand balance to trigger a further sell-off or a new round of growth.

BoE Rate Decision: One Last Hike Before Hitting Pause?

In the UK, the Bank of England will probably deliver a softer quarter percentage point rate hike on Thursday at 12:00 GMT, and while that could theoretically help the British pound to recoup some lost ground, a potential pause to the hiking cycle could easily put a break on any sterling rallies.

Currencies Down Under Miss Out On the Rally

Currency markets do not correspond to a typical risk-on trading session. Especially the currencies Down Under miss out on the rally. The move was Aussie driven, with the publication of the minutes of the previous monetary policy meeting weighing down on the currency.

Canadian Dollar Shrugs as Inflation Falls

Canada’s headline inflation fell to 5.2% y/y in February, down from 5.9% y/y in January and beating the consensus estimate of 5.4%. This was the largest deceleration since April 2020 and the lowest inflation rate since January 2021. This is clearly good news, but it’s still premature for the Bank of Canada to pat itself on the bank for a job well done.

A Fed Decision Has Barely Been This Uncertain

Even though activity on Fed funds futures looks like it finally is pointing at a solid-ish consensus that the Fed should hike rates by 25bp today, no one really knows how much importance the Fed will assess to the latest banking stress, which, in reality, resulted in an uptick in Fed’s balance sheet due to additional liquidity, but which also tightened the financial conditions sharply.

How Much More Tightening Projected in Dot Plot is the Key Question

How much more tightening is being projected in the dot plot is the key question. But given current market positioning, yields especially at the short end of the curve have further upside scope.

Recovery Rally Pauses ahead of Fed

This period of calm will no doubt be welcomed by the Fed and allow for it to continue hiking by 25 basis points without much controversy. The question is whether it will adopt a similar position to its counterpart in Europe and refrain from commenting directly on future moves or sending any strong signals.

Will Eurozone PMIs Allow ECB to Continue Raising Rates?

At last week’s gathering, the ECB decided to deliver the previously promised 50bps hike, disappointing those expecting a smaller increase or no increase at all due to the turmoil in the banking sector. At the press conference following the decision, President Lagarde dismissed the idea that the efforts intended to bring inflation to heel are a threat to financial stability, arguing that the Euro area banking system remains resilient and that, if anything, higher rates could bolster margins.

Bitcoin's Bullish Triangle

Bitcoin has gained 2.6% over the past 24 hours to $28.3K. Meanwhile, demand for other cryptocurrencies was revived as the total crypto market capitalisation rose 3.4% to $1.18 trillion. Ethereum gained 4% overnight, reaching $1800.

UK Inflation Will Strengthen the Hawks

This is an essential signal of continuing inflationary pressure. It clearly shows that the Bank of England’s work to contain inflation is far from over.