On Monday, market players were seen to be more cautious amid concerns that more sanctions would be imposed on Russia over its actions against Ukraine. At the same time, a portion of the closely watched U.S. yield curve continues to spark concerns of a recession.
The German administration issued a statement that there is a high probability that western countries will agree to impose more sanctions on Russia in the next few days after Ukraine accused Russian troops of committing war crimes following the deaths of civilians near Kyiv.
With more sanctions then it will increase more pressure on the Russian economy. Thus, Mark Haefele, chief investment officer at UBS Global Wealth Management is of the view that what will be the main driver of market movements in the near future is the extent to which the peak of the restrictions is imposed.
The Euro has depreciated by 0.63% to a trading level of 1.0984 against the US dollar. Analysts expressed concern that the euro could depreciate further if the European Union increases its sanctions to target energy imports from Russia.
Investor sentiment in the European zone also fell to its lowest level in nearly two years in April based on a survey showing on Monday, suggesting the start of a recession in the second quarter of 2022. European zone government bond yields have begun to fall after expectations of monetary tightening last week that pushed up German borrowing costs. to the highest level since February 2018.
Meanwhile in the US fixed income market, the yield curve of between two and 10 years of US notes, is seen to indicate there is a possibility of an economic contraction in the future. A strong employment report for March last week supported the view that the Federal Reserve would aggressively raise interest rates to tame soaring inflation.
Several Fed drafters are expected to speak, where they are expected to give indications of more hawkish signals, and minutes of the policy meeting will be scheduled for Thursday.
The US dollar index, which measures the US dollar against six major currencies, strengthened 0.25% to a trading level of 98.85.
On the other hand, the Bank of Japan acted repeatedly last week to keep its bond yields close to zero. The yen traded lower against the US dollar, which strengthened 0.30% against the yen.
Markets will focus on the development of the Russia-Ukraine conflict and the minutes of the FOMC meeting in the early hours of Thursday morning.
