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EUR Up on Lagarde Statements, AUD Down; OPEC

The focus as usual is on the war in Ukraine, where things aren’t looking as good as they were a few days ago. The negotiations in Turkey aren’t going as well as many people had hoped. Kremlin spokesman Dmitry Peskov said that they hadn’t seen a breakthrough in the talks, while Ukrainian President Zelensky said that “Russia is deploying new forces on our terrain to try to continue destroying us.To get more news about ospreyfx review, you can visit wikifx.com official website.

Meanwhile Reuters reported that the European Commission is readying new sanctions against Russia, with the magnitude of the new measures depending on Moscow’s stance on gas payments in roubles. US President Biden pledged a further $500mn in aid to Ukraine while UK PM Boorish Johnson said the UK was “looking at going up a gear” in its military support to the country.

Net net the belligerents aren’t showing any sign of coming to an agreement yet and those on the sidelines are pouring in further aid, which suggests that the conflict is less likely than ever to end in Ukraine’s defeat or surrender. Since Russia is unlikely to admit to defeat any time soon either, that suggests the conflict will be dragged out longer. This has caused a risk-off reaction that has dragged down stock markets and hit the risk-sensitive commodity currencies.

Oil prices rose on the disappointing negotiations but then turned around and fell sharply on news that the US is considering releasing up to 180mn barrels of oil from its Strategic Petroleum Reserve. The SPR has 583mn barrels of oil so this would be almost 1/3rd of the total amount. US President Biden will speak about efforts to lower energy prices at 1730 GMT today.
EUR rallied as Germany and Spain’s inflation figures surged even more than expected, which was surprising as they were expected to rise quite a bit anyway. Spain’s 9.8% yoy inflation was particularly shocking.

They’re not only far and away the highest readings since the start of the Eurozone, they’re also the highest readings in decades using the national definitions of inflation, which go back a few more years than the EU-wide harmonized index of consumer prices. For Germany, it’s the highest inflation since Nov. 1981.

Speaking in Cyprus after the data releases, ECB President Lagarde warned that Russia’s Ukraine invasion poses “significant risks to growth” and has introduced “considerable uncertainty” into the economic outlook. She said three main factors are likely to take inflation higher for longer: energy prices, food inflation, and global manufacturing bottlenecks. As for the ECB response, she repeated recent comments in which she said the ECB would “emphasise the principles of optionality, gradualism and flexibility.” She also advocated a fiscal approach to dealing with higher energy prices, which seems to be the way countries are navigating the risk of stagflation: fiscal policy to fight the “stag,” monetary policy to fight the “flation.”

Note: The table above is updated before publication with the latest consensus forecasts. However, the text & charts are prepared ahead of time. Therefore there can be discrepancies between the forecasts given in the table above and in the text & charts.

OPEC+ meeting: business as usual?

There will be a virtual OPEC+ meeting today. Recently these meetings have been brief and short on drama as the group generally just agrees to continue with their previously determined plan to increase output by 400k barrels a day (b/d). Now however they face a crossroads. Russia is the largest producer in the group, although perhaps the #2 exporter (after Saudi Arabia).Now what do they do? With Russia being shut out of world markets, how do they treat it? How do they treat its production quota? And most of all, what should they do in response to the request from the G7 meeting last week: “We call on oil and gas producing countries to act in a responsible manner and to increase deliveries to international markets, noting that OPEC has a key role to play.”