- US February CPI +7.9% y/y vs +7.9% expected
- ECB's Lagarde opening statement: Inflation could be considerably higher than forecast
- Lagarde Q&A: There were different views around the table on all views
- Growth and Inflation projections for the euro area. Growth lower in 2022/Inflation higher
- ECB dramatically increases 2022 inflation forecast
- ECB sources report: Only a handful of policymakers made the case for open-ended QE
- IMF warns on downward revisions to global growth forecast
- Biden says inflation numbers show the costs of imposing sanctions
- Putin: We are adhering to our obligations on energy to unfriendly countries
- Russia to temporarily suspend exports of fertilizers
- US initial jobless claims 227K vs 217K estimate
- US treasury auctions off $20 billion of 30 year bonds at a high yield of 2.375%
Markets:
- Gold up $5 to $1996
- WTI crude oil down $2.38 to $106.33
- US 10-year yields up 4.4 bps to 1.99%
- Italian 10-year yields up 11 bps to 1.93%
- S&P 500 down 17 points to 4260, or 0.4%
- CAD leads, EUR lags
The slide in the euro was the big story on the day, despite the ECB announcing a faster taper of asset purchases. I suspect there was some position squaring in the euro yesterday ahead of the ECB and it was coming out today. The trade is much less about rate differentials and much more about a worsening growth outlook for Europe in light of Russian sanctions and extremely high energy prices. Lagarde highlighted both the upside risks to inflation and downside risks to growth. There's a very real scenario brewing where the ECB could be forced to hike into a recession. The euro was steadily sold and is at a session low, down almost a full cent at 1.0981.
The pound tracked the same move in light of its sensitivity to European growth. It's been offered since New York first arrived and the selling has been unabated.
On the flipside, the commodity currencies shrugged off the poor risk tone and may be finally benefiting from commodity prices as volatility cools.
The risk is that yields are also rising with US rates hitting new cycle highs. That could reignite rate hike and growth fears globally and that's a scenario that will be back in focus with the Fed decision next week.
