March 2022 - Monthly Economic Outlook

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Gain an overview of the latest developments on the currency market and anticipate fluctuation risks.
Ukraine: Forex market in risk aversion mode

Initially, there were few signs of reaction on the Forex market to rising tensions in Ukraine. Operators have long believed that the conflict would remain local and limited to the Donbass. Everything changed when Russia decided to invade the whole country on Thursday 24 February. Volatility rebounded sharply in foreign exchange. The market went into risk aversion mode (pullback to safe-haven assets such as the CHF and USD). Commodity currencies are also doing well. They benefit from the significant rise in energy and agricultural prices. We are facing a period of uncertainty that will continue until there is, at best, a ceasefire. The euro is expected to fall further against its main counterparts. Sudden jolts in the exchange rate are likely, as was the case on 24 February and last Monday (following the firm sanctions against Russia over the weekend).

High: 1.1484 Low: 1.1059 Change: -1.74 %

Our target of 1.10 will certainly be reached much sooner than we expected. The rise in geopolitical risk, linked to the war in Ukraine, has led to depreciation of the euro almost across the board in recent weeks (although there are some exceptions). Whilst the situation on the ground remains complex, the decline of the euro should continue. Technical analysis indicates a target of 1.0920 if the symbolic 1.10 area is breached. Despite the strong rebound in inflation in the Eurozone in recent months, the European Central Bank is expected to maintain its accommodative monetary policy in the short term. Next week, it should focus in particular on the impact of the war on inflation and growth and the consequences for financial stability. A change in monetary policy could only occur once the conflict has stabilised (e.g., ceasefire).

High: 0.8472 Low: 0.8305 Change: +0.20 %

EUR/GBP is one of the few major FX pairs that is not following the underlying market trend (pullback to safe havens, fall in EUR, etc.). Over one month, the EUR/GBP is even up (+0.20%). In recent weeks, the pair's range has been fairly stable, between 0.83 and 0.85 (the year-to-date limit). It is difficult to find rational reasons for the relative stability of the EUR/GBP. For the time being, the pair should continue to trade in a wide range against a backdrop of reduced volatility.

High: 133.17 Low: 127.33 Change: -1.46 %

The yen is one of the best safe havens in cases of geopolitical risk. The war in Ukraine has proven this once again. From a technical analysis point of view, the trend is still bearish. Breaching the strong support at 127.30 (which is a one-year low) could open the door to an acceleration of the decline towards 126.50 in the short term. Once again, the Forex market is very volatile and developments in the EUR/JPY pair, like other pairs, will depend heavily on the military situation in Ukraine.

High: 1.0604 Low: 1.0190 Change: -1.81 %

The fall of the euro against the Swiss franc was massive: a drop of almost 400 points in the space of a month. The depreciation of the euro has accelerated in recent sessions due to the announcement of significant economic and financial sanctions against Russia following the invasion of Ukraine. Having up until now limited its foreign exchange interventions, on Tuesday, the Swiss National Bank (SNB) indicated that it was once again prepared to act. Next Monday's publication of sight deposits at the SNB, which serves as a barometer for judging foreign exchange interventions, should confirm large-scale purchases of euros to limit the appreciation of the CHF. We doubt that the central bank will let the EUR/CHF reach parity. If this were to happen, there would certainly be an acceleration of the downward trend that would be difficult to stop in the short term. However, we recognise that the situation on FX has been very volatile over the last few sessions. There is little certainty at this stage.

High: 1.4635 Low: 1.4037 Change: -1.53 %

The war in Ukraine has led to a surge in energy commodity prices: +24% for Brent and WTI prices over one month. The $100 mark has been blithely breached for oil in recent sessions. Analysts anticipate that the increase could be at least $125. Added to this is the fact that the Bank of Canada (BoC) is normalising its monetary policy much more quickly than the European Central Bank. The BoC raised its key interest rate by 25 basis points to 0.50% on Wednesday as expected, with more hikes to come. Against this backdrop, the upward trend of the CAD against the EUR continues. The Canadian currency has gained 1.53% against the euro in the space of a month. The increase is as high as 7.6% over a one-year period. Fundamentals and technical analysis argue for a continued rise in the CAD. The next technical threshold to watch for the EUR/CAD pair is 1.3980 - a level not seen since July 2015.

High: 1.6226 Low: 1.5300 Change: -3.43 %

The war in Ukraine is the main factor driving changes in the EUR/AUD paid. This is the case for all other Forex pairs. In the space of a month, the euro has depreciated by 3.43% against the Australian dollar. This is certainly just the beginning. The AUD has benefited fully from the rise in commodity prices since the start of the conflict. Compared to the Eurozone, which is directly exposed to Russia (because of hydrocarbon imports among other things), the Australian economy is rather resilient. This was acknowledged by the Governor of the Australian Central Bank on Tuesday. A rate hike in Australia is still on the cards in our view, but it is likely to come later than expected this year, probably around the fourth quarter, due to the uncertainties raised by the war in terms of global growth dynamics. This anticipated rate hike is another factor supporting the price of the AUD against the EUR. From a technical analysis point of view, in the current environment, the EUR/AUD pair could return to the levels seen in late 2017 of around 1.50-1.51.

High: 7.2982 Low: 7.0050 Change: -4.26 %

The euro is falling against almost all other currencies. This is also the case with the CNH. The single currency is often penalised by the flight to safety (which explains the rise in the US dollar and the Swiss franc, for example) and by the perception of foreign exchange market operators that the euro and the Eurozone will be more penalised by the current crisis than the rest of the world (which explains the fall in the euro against the CNH). Until the situation on the Ukrainian front calms down, the euro is likely to fall further. This is also confirmed by technical analysis. The next threshold to watch for on the EUR/CNH pair is 6.90. It could be reached sooner than we think.

High: 379.68 Low: 352.39 Change: +6.53 %

The Forex market went into risk aversion mode following the Russian invasion of Ukraine. The euro appears to be a safe haven for many investors compared to Central and Eastern European currencies (including the HUF). This explains the strong rebound of the single currency in the space of a month (+6.53%). While the crisis lasts, the current movement is likely to continue. We would not be surprised to see the EUR/HUF pair temporarily exceed the psychological threshold of 380. The market is obviously very volatile in the short term, which is why it is important to plan an appropriate currency hedging strategy.

High: 340.97 Low: 307.41 Change: +8.66 %

It is a well-known fact. The US dollar is one of the best safe havens in times of geopolitical crisis and war. Hence the greenback's sharp rise against the HUF in the space of a month (+8.66%). The situation on the ground in Ukraine is very complex. It is difficult to know what will happen in the short term. Until there is more visibility, it is clear that the US dollar will continue to strengthen. From a technical analysis point of view, we could quickly surpass the three-year high at 341.31. We are facing a market configuration that is obviously very particular and unprecedented for many Forex market operators.


Economic calendar:
03/03 USD

ISM Non-Manufacturing for February

04/03 USD

US Employment Report for February



Meeting of the National People’s Congress (NPC) and the Chinese People’s Political Consultative Conference (also known as the “Two Sessions”)

10/03 EUR

European Central Bank Meeting

10/03 USD

Consumer Price Index in February (first estimate)

15/03 EUR

German ZEW Economic Sentiment Index for March

15-16/03 USD

US Federal Reserve meeting

17/03 GBP

Bank of England meeting

17-18/03 JPY

Bank of Japan meeting

22/03 HUF 

Hungarian central bank meeting