What you should know on Tuesday, March 29:
The market mood was sour, helping the US dollar end the day with gains against most major rivals.
The initial catalyst came from the Bank of Japan. The central bank announced that it would buy an unlimited amount of 10-year JGBs at 0.25% in a bid to defend the yield cap. This is the second time the central bank has intervened in the foreign exchange market this year. The decision sent the JPY into a sell-off spiral that helped the dollar move further up the FX board. USD/JPY reached a high of 125.05, before falling around 123.60.
The yield on the 10-year Treasury note hit a new multi-year high of 2.557%, then fell back to 2.46% and triggered a downward correction in the dollar.
On the war front, Russian lawmaker Ivan Abramov said Monday that the G7’s refusal to pay for Russian gas in rubles would lead to an unequivocal cutoff of supplies. German Finance Minister Christian Lindner responded that his country is ready if Moscow retaliates against the G-7 and that companies must resist Russia’s demands for gas payments in RUB.
Wall Street spent the day in the red, bouncing ahead of the close on news that Russia is ready to make some concessions, not demanding that Ukraine be “denazified” and allowing the country to join the EU if it remains neutral.
Additionally, China announced more coronavirus-related lockdowns, this time in Shanghai. The news further exacerbated concerns related to inflation and supply chain disruptions.
Bank of England Governor Andrew Bailey has warned of changes in commodity markets that pose a risk to financial stability. He also pointed out that there are risks on both sides of inflation. GBPUSD fell to 1.3065 and ended the day just below 1.3100. The EUR/USD pair hit a fresh 2-week low of 1.0944, encountering sellers approaching the 1.1000 figure.
Commodity-linked currencies ended the day with modest losses. AUD/USD is trading just above the 0.7500 level, while the USD/CAD is up at 1.2530. Gold came under pressure and ended the day at $1,926 a troy ounce, while crude oil prices also fell, with WTI now trading around $104.60 a barrel.
The macroeconomic calendar, with the focus shifting to US employment data due out at the end of the week.
Source: Fx Street
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