March 28, 2022
EUR/USD: The euro declined against the dollar as concerns over a potential slowdown in the eurozone economy kept bearish pressure on the pair. Business morale in Germany deteriorated in March due to worsening supply chain problems caused by high gasoline prices and driver shortages. The data had little impact on bond markets after PMI data showed that business activity in the euro area was stronger than expected in March, although prices rose at a record pace and business optimism was hit hard. The U.S. Dollar Index (DXY) approaches a three-week-old resistance at the time of publication, as headlines suggesting further challenges for Ukraine and China’s covid conditions underpin the greenback’s safe-haven demand. Also favoring the U.S. dollar are the hawkish comments from the Federal Reserve (Fed) policymakers.
GBP/USD: The British pound edged lower against the U.S. dollar after consumer morale fell to its lowest level in 16 months and an unexpected decline in retail sales. The Office for National Statistics said February retail sales volumes were down by 0.3% from January as stormy weather deterred some shoppers from venturing out. Additionally, sales excluding fuel fell 0.7% during the reported month and missed consensus estimates pointing to a 0.5% increase. Meanwhile, a survey by GfK showed British consumer confidence fell to its lowest level since November 2020 in March because of inflation worries, high interest rates and the Russia-Ukraine conflict. On the other hand, the U.S. dollar trimmed a part of its losses and continued drawing some support from rising bets for a 50 bps Fed rate hike at the May meeting.
XAU/USD: Federal Reserve hawkish pivot keeps weighing on the yellow metal. On Tuesday, Fed Chair Jerome Powell expressed that the Fed would do whatever necessary to return “price stability.” He emphasized that if needed to raise rates more than 25 bps, the regulator will do so. XAU/USD traders reacted immediately to the headline, pushing the non-yielding towards the weekly low. But gold expects to rise as concerns over the war in Ukraine and rising prices boosted its appeal as a safe-haven asset and an inflation hedge. Geopolitical issues will keep affecting gold, and any risk-off market mood should benefit precious metals.