The ECB's dovish stance weighs on the euro

As many major hubs are on holiday, Friday trading is being followed by low trading volumes and sluggish market movements.

As a result of the dovish stance from the European central bank, the euro got dumped. According to Lagarde, an interest rate hike will not occur until after the conclusion of the ‘Asset Purchase Program’ (APP) in the third quarter of this year.

In addition to the dovish stance, the Ukraine crisis is slowing growth in Europe, and a high inflation rate of 7.5% threatens households' purchasing power. The ECB will have an increasingly difficult time getting out of this situation as oil prices are on the cusp of another upward trend, and household energy bills are on their way up.

FX market

It’s been a positive week for the US dollar so far. Despite underperformance against the pound, the US dollar hit a fresh high against the Japanese yen, reaching its highest level since 2002. Due to some of this week's economic data, it appears that the Bank of England may get cold feet when it comes to hiking rates next month. 

The euro was on the backfoot at the end of this week after the European Central Bank did not give any indication that it was eager to raise rates. However, although the ECB was keen to emphasize that the APP programme would end at the end of Q3, no indication was given that they would be willing to go the other way and start quantitative tightening. This means that it is on a divergent path from other central banks, which caused the euro fell below 1.0800 for the first time since April 2020.   

Oil is set for a 9% weekly gain

The price of crude jumped nearly 3% on the day and nearly 9% on the week. This was because the market was hijacked once again by a supply scare resulting from the news that the European Union may phase out Russian oil imports.

Early in the Friday, gains in oil were limited as Chinese refiners appeared set to reduce crude throughput this month by about 6%. In fact, the scale of the reduction is similar to that experienced during the early days of the COVID-19 pandemic two years ago. The proposed EU ban on Russian oil sparked an increase in buying crude futures and convinced some short sellers to cover their positions ahead of Good Friday which extends the US trading weekend.