Exchange rates under the dollar's influence, yen on the ropes, euro sinks (Daily analysis 19.04.2022)

Once again, the dollar is playing cards in the currency market, while currencies without support from monetary authorities and economies dependent on imports of energy resources are depreciating. This means serious trouble for the euro, which is losing ground after last Thursday's meeting of the European Central Bank and a massive sell-off of the Japanese yen.

The observation has been confirmed that the European Central Bank will not be rushed to signal that an increase in interest rates will be necessary this year. In our view, this is the delaying of the inevitable. The next round of macroeconomic projections should change the monetary authorities' attitude and therefore support the investors' perception of the euro. For the time being, however, the fearful, conservative attitude of the European monetary authorities is driving investors away from the single currency. The EUR/USD exchange rate collapsed by around 3% in April and is slipping below 1.08.

The potential re-election of Emmanuel Macron would provide some respite for the euro, which should result in a spike, a so-called relief rally. The key monetary policy trends for the currency market are definitely on the side of the dollar. In addition, the yen, another currency that cannot count on the support of central bankers, has recently been in even greater trouble than the euro. Moreover, the Japanese currency is dependent on imports of energy raw materials - similar trends, but of lesser strength, were also observed in the autumn. The USD/JPY exchange rate is rising very sharply towards 130.00, the highest level in about 20 years.

Macro calendar: analysing the effects of war on the economy

On Tuesday, the International Monetary Fund will present its new global and national GDP growth forecasts. This key institution's assessment of how high commodity prices, inflation and war will affect the economy could be crucial in determining market sentiment. Recent signals from the Chinese economy, which is still struggling with pandemics and restrictions, do not bring optimism.

Readings from the US housing market, which will face a sharp increase in financing costs and a deterioration in consumer sentiment, are also worth paying attention to. The most profound implications for currency quotations may have Friday's publication of British retail sales. Another disappointment could prompt the Bank of England to remain faithful to the soft stance that plunged the pound in March despite inflation accelerating to 7% year-on-year. Of course, investors will also be constantly monitoring the course of the war in Ukraine and reports from the campaign finale ahead of Sunday's second round of the French presidential election.