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Historical Safe Havens In Demand Amid Commodity/Risk Selloff

FOREX
  • Both the US Dollar and Japanese Yen faired the best amid G10 currencies on Monday as the commodity complex came under significant pressure to start the week and lent support to historical safe havens.
  • Oil prices have taken a considerable leg lower, with Brent and WTI prices off over 5%. Ongoing fears of a weeks-long ultra-strict lockdown being imposed in Beijing, in a similar scenario to that currently taking place in the megacity of Shanghai, is weighing on the outlook for demand.
  • In turn, this has contributed to ongoing weakness in the Chinese Yuan. Spot USD/CNH pierced the CNH6.55 figure on its way to fresh one-year highs at 6/6092, while its implied volatilities soared to fresh cycle highs across the curve.
  • Early in NY trade, the PBOC cut the FX RRR by 1ppt, in a partial reversal of their last policy move using the tool in December last year (where they raised the FX RRR by 2ppts). The mechanics behind today's policy move mean they lessen the incentive for commercial banks to hold more in FX reserves. The move could be a response to the broad USD/CNY rally we've had over the past week or so and put the top in during Monday’s session
  • Furthermore, waning risk sentiment across global markets weighed heavily on the likes of AUD and GBP in addition to near two percent declines for both SEK and NOK.
  • Ongoing uncertainties relating to the Ukraine warfare is keeping EURUSD vulnerable and the pair has cleared support at 1.0758, the Apr 14 low and a short-term bear trigger. This confirms a resumption of the downtrend and an extension of the bearish price sequence of lower lows and lower highs. 1.0727 has also been breached, the Apr 24, 2020 low and this signals scope for a move towards 1.0636 next, the Mar 23 2020 low and the next major support.
  • A light data docket on Tuesday is headlined by US durable goods and consumer confidence data. Focus will then turn to Australian CPI on Wednesday and Thursday’s Bank of Japan meeting.
Energy BulletsCommodities
Energy BulletsCommodities

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