Expect another whipsaw week of price action as the Ukraine conflict rages on. Two major central banks are expected to raise interest rates by 25bps each, as policymakers look beyond any downturn in growth. Instead, concerns about sky-high inflation are foremost with energy and commodity prices set to remain elevated for a protracted period. This will continue to favour AUD and CAD.

The US dollar should remain supported by a relatively hawkish Fed, energy independence and liquidity. The newly updated FOMC dot plot will signal how aggressive Fed members will be in this tightening cycle. Markets are currently pricing in over six rate hikes in total for this year. Policymakers may stress the need to remain “nimble” given the geopolitical upheaval. USDJPY broke to the upside last week and should aim for 118 and beyond in the current environment.

The pound has been hit hard in recent weeks, weighed down by the Ukraine crisis. This comes even on the back of money markets once again pricing in around six 25bp rate moves this year by the Bank of England. But the worsening outlook amid a cost of living crisis may not offer much help to sterling, with cable sellers aiming for 1.30 and then 1.2853.

Major risk events of the week

15 March 2022, Tuesday:

–UK Jobs: Consensus expects the unemployment rate to tick down one-tenth to 4% in January. The tightness of the labour market is likely to continue despite ongoing Omicron disruptions over most of the month. Further upward pressure on wages is forecast.

–German ZEW Survey: Economists see the index plunging to 5.0 from 54.3 in January. This is comparable to the fall at the start of the pandemic. Russia’s incursion into Ukraine could derail Germany’s recovery. Sanctions on the energy sector remain a key risk going forward. EUR/USD’s ECB-led push into resistance at 1.11 was brief and sellers will target the 1.0805 low and beyond if peace remains far away.

16 March 2022, Wednesday:

–US Retail Sales: After January’s 3.8% jump, the February headline print is expected at 0.4%. Analysts says auto sales will fall sharply with more spending moving towards services in the coming quarters. That said, wages are rising amid solid job growth.

–FOMC Meeting: Markets expect the first 25bp hike of a tightening cycle that will deliver six similar–sized hikes in total this year and three more in 2023. Analysts say that two officials could vote for a 50bp move given inflation is already close to 8%. Focus will be on the updated dot plot and guidance on balance sheet normalisation.

17 March 2022, Thursday:

–Bank of England Meeting: The MPC is expected to vote unanimously for a 25bp rate rise, the third straight meeting at which it has raised the Bank Rate. This takes it back to the pre-pandemic level of 0.75%. Analysts say that geopolitical risks and rising energy costs are likely to make future decisions tricky. Does the “unreliable boyfriend” make an appearance and the bank become more cautious? Policymakers may appear more concerned about higher inflation than the risk of economic weakness, especially with rates still very low.

18 March 2022, Friday:

–Bank of Japan Meeting: Analysts expect no changes to policy measures. Inflation is muted and Japan’s growth outlook is murky due to ongoing Covid outbreaks. The country, as net oil importer, is also highly susceptible to rising energy and commodity prices. The yen has suffered over the past week and rising US yields are set to underpin more gains in USD/JPY.