Fundamental/Quantitative analysis

Fear and Greed Index

USD

Fed's Brainard: Russia's invasion of Ukraine is driving up the topline of inflation, particularly in the energy sector.

Fed's Brainard: The neutral rate may continue to be at a low historic level.

Fed's Brainard: Reductions in the balance sheet could come as soon as June after the decision made in May.

Fed's Brainard: In June, Balance-sheet reductions may begin.

Forex Pairs Strength

EUR RUB USD

Russian Deputy Foreign Minister: US and NATO vehicles delivering weapons on Ukrainian soil will be considered legitimate military targets. - TASS.

GBP RUB OIL Energy

German govt spokesperson: The German Govt rejects the EU ban on Russian oil for now.

CAD

BoC: The housing market in Canada, which has been exceptionally high, and is expected to moderate.

CAD

BoC: It is ending reinvestment in the Government of Canada bonds, maturing bonds will no longer be replaced and balance sheet will decline over time.

CAD

BoC sees increasing risk that expectations of elevated inflation could become entrenched.

BoC: The Russian invasion of Ukraine is causing new economic uncertainty, such as commodity price spikes, price disruptions. These are the main drivers for higher inflation forecast.

BoC: 2021 Q3 annualized GDP was 5.5% (vs 5.4% in the January MPR), Q4 annualized GDP seen 6.7% (vs 5.8%), Q1 annualized GDP seen 3.0% (vs 2.0%), Q2 annualized GDP seen 6.0%.

BoC: Total ownership of GOC bonds outstanding has dipped to 43% from 45% in January, the value of total assets in GOC bonds has remained constant at C$430 bln.

BoC: The potential output growth assumed to average about 2% a year over 2022-2024 vs January forecast of 1.6% a year over 2021-2023.

The BoC projects 2021 Canada GDP was 4.6% (unchanged from January), 2022 GDP seen 4.2% (vs 4.0%), 2023 GDP 3.2% (vs 3.5%) and 2024 GDP 2.2%.

The BoC has updated the estimated range of nominal neutral interest rate to 2%-3%, 0.25% points higher than in April 2021 reassessment.

BoC: Inflation will remain well above 1-3% control range until end-2022, steadily declining to around 2.5% in H2 2023 and 2% in 2024.

BoC hikes inflation outlook, now expected to average slightly below 6% through the first half of 2022; in January, the bank predicted that it would be close to 5% in the first half.

BoC: Effects of Ukraine war to add 0.7% to CPI in 2022.

BoC: Overall 2021 Canada inflation averaged 3.4% (unchanged from January), 2022 inflation seen at 5.3% (vs 4.2%), 2023 inflation seen at 2.8% (vs 2.3%), 2024 inflation seen at 2.1%.

BTC

Extreme Fear!!!

Fear and Greed Index

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CAD

BoC's Gov. Macklem: We need higher interest rates, the economy can handle them. I reiterate that the bank will act forcefully if need be.BoC's Gov.

BoC's Gov. Macklem: Canadians should expect rates to continue to rise towards more neutral settings, the current estimate is that this is between 2% to 3%.

BoC's Gov. Macklem: If demand responds quickly to higher rates and inflationary pressures moderate, it may be appropriate to pause hikes once we get closer to the neutral rate.

EUR

ECB Interest Rate Prep

EUR

Investors are pricing in 0.6 percentage points of rate rises by the ECB before the end of this year

Deutsche Bank

The prospect of half-point adjustments has also been raised by Deutsche Bank.

HSBC

Whatever course is ultimately adopted, there will be "no substantial pushback on market expectations" next week, according to HSBC Securities European Economist Fabio Balboni, who believes that a hawkish narrative may assist the ECB to reduce the risk of second-round effects by dampening wage demands.

ING’s View

The ECB April meeting should not be one for major policy shifts, given the lack of hard data to judge the impact of the Ukraine conflict on the eurozone’s economy and lingering uncertainty around how the war will evolve. In our view, reiterating the Asset Purchase Programme (APP) scheduled reduction announced in March (€40bn in April, €30bn in May, €20bn in June), with a somewhat firmer commitment to end APP after June, as well as data-dependency, appears the only viable option for now.

Financial Times

Investors are pricing in 0.6 percentage points of rate rises by the ECB before the end of this year, which would take its main deposit rate back into positive territory for the first time since 2014, up from its current all-time low of -0.5%.
Several ECB policymakers have said they expect the central bank to raise rates this year and some, such as ECB’s Knot and ECB’s Wunsch have said it could do so twice this year.

Forex Pairs Strength

EUR ENERGY

ECB: Trade disruptions are leading to new shortages of materials and inputs.

ECB: Rising energy and commodity prices are decreasing demand and slowing production.

ECB: Inflation has increased significantly and will remain high over coming months, mainly because of sharp rise in energy costs.

ECB: Inflation pressures have intensified across many sectors.

ECB: APP monthly net purchases will amount to €40 billion in April, €30 billion in May and €20 billion in June.

ECB: At today’s meeting, the ECB judged that incoming data since its last meeting reinforce its expectation that net asset purchases under APP should be concluded in third quarter.

ECB: Accordingly, the ECB expects interest rates to remain at their present levels until it sees inflation reaching 2% well ahead of end of its projection horizon and durably for rest of projection horizon.

Traders price 64bps of ECB hikes by year-end vs 68bps on Wed.

ECB: The ECB also intends to continue reinvesting, in full, principal payments from maturing securities purchased under APP for an extended period of time past date when it starts raising interest rates.

The ECB has confirmed that the APP will end in the third quarter.

ECB: in any case, future roll-off of the PEPP portfolio will be managed to avoid interference with appropriate monetary policy stance.

ECB: Refinancing operations ECB will continue to monitor bank funding conditions and ensure that maturing of operations under third series of TLTRO (TLTRO III) does not hamper smooth transmission of its monetary policy.

ECB confirms rates will rise some time after APP ends.

EUR China Energy

ECB's President Lagarde: Surging energy prices are reducing demand and production.

ECB's President Lagarde: Inflationary pressures have increased across numerous sectors.

ECB's President Lagarde: Growth remained weak in the first quarter.

ECB's President Lagarde: Increased pandemic precautions in Asia are contributing to supply chain concerns.

ECB's President Lagarde: Fiscal and monetary support is still crucial

ECB's President Lagarde: Energy costs will remain high in the near future.

ECB's President Lagarde: Inflation is becoming more widespread.

ECB's President Lagarde: We are unsure how long higher core inflation will last.

ECB's President Lagarde: The risks to the economic outlook are skewed to the downside.

ECB's President Lagarde: Downside risk has significantly increased.

ECB's President Lagarde: The upside risk has increased.

ECB's President Lagarde: There are no liquidity problems in the financial sector.

ECB's President Lagarde: Credit criteria are projected to tighten in the coming months.

ECB's President Lagarde: There are no significant stresses in the money markets.

ECB's President Lagarde: Lending rates are beginning to reflect rising market rates.

ECB's President Lagarde: The APP will be phased out in the third quarter.

ECB's President Lagarde: ECB will finish the APP first, then hike some time later.

ECB's President Lagarde: Some time after is anywhere between a week and several months.

ECB's President Lagarde: The ECB will decide on the APP's expiration date and the rate path forward in June.

EUR USD RUB GBP Energy

Fed's Williams: The labour market is nearly back to where it was before the pandemic.

Fed's Williams: The Fed must return to more normal policy levels as soon as possible.

Fed's Williams: The Fed needs reverse policy actions beginning in March 2020.

Fed's Williams: The pace of rate hikes depends on the economy's direction, but 50 basis points at the next meeting is a feasible option.

Fed's Williams: My baseline assumption is that the neutral rate remains in the low 2-2.5% range.

Fed's Williams: Depending on inflation, we may need to move a little higher.

Fed's Williams: As the Fed tightens policy, the underlying trend in inflation will peak soon and fall later this year.

Fed's Williams on the balance sheet: I expect to start that in June if we make a decision in May.

IMF's Managing Director Georgieva: Ukraine's war will contribute to downgrades in 143 economies, accounting for 86% of global GDP.

In May, Iraq raises the price of Basrah crude for export to Asia, $5.80/BBL premium for Asia.

Crypto

IMF's Managing Director Georgieva: The pandemic has accelerated the development of cryptocurrencies and digital assets.

BTC Fear and Greed Index