Oil Soars As EU Announces Russian Oil Ban

Oil prices soar as EU announces partial ban on Russian oil, due to cover 90% of imports by
year end. USD rallies as Fed’s Waller says rate hikes likely to continue all year, rising above
neutral. CAD rallies in boost from higher oil prices. EUR and GBP under pressure on rate hike
concerns.

Key Factors for Today

- USD rises on hawkish Fed comments and risk aversion
- Equities fall on EU-Russian oil embargo news
- EU announces partial ban on Russian oil, sending oil sharply higher
- CAD leads the way in FX, boosted by higher oil prices
- Eurozone CPI expected to hit almost 8% today.

Coming Up

- EUR eurozone flash CPI (May)
- CAD GDP m/m
- USD CB Consumer confidence

US Dollar Bid on Tuesday Following Fed Comments

The US Dollar is seeing better demand on Tuesday with the Dollar Index now up around
0.5% off yesterday’s lows. Fed’s Waller yesterday pushed back against the idea of a post-July
Fed pause saying that he sees interest rate rises continuing throughout the year with the
potential for the Fed to take rates well beyond neutral, if necessary. President Biden and
Fed chairman Powell will hold a special meeting today to discuss inflation.

Equities Reverse Lower on EU-Russia Oil News

Equities have started the European session on Tuesday with a softer tone. The EU’s decision
yesterday to push ahead with a partial embargo on Russian oil has increased fears of an
inflationary spiral in the eurozone with growth expected to suffer consequently. Given the
significance of this development, the contagion effect on other economies has seen
investors offloading positions in indices around the globe on Tuesday.

CAD Rallying on Higher Oil Prices, EUR & GBP Falling

In FX, CAD is leading the gains across late Asian and early European trading on Tuesday. The
spike in oil prices following the EU-Russia announcement is driving the upside in CAD which
is likely to be extended into tomorrow’s BOC meeting. GBP and EUR have been the main
laggards today. Today’s eurozone flash CPI number for May is expected to see a further rise
to almost 8%, putting more pressure on the ECB to hike. As with EUR, GBP is falling on
growth concerns in the face of further expected tightening from the BOE in June.

Muted Action in Gold and Silver

Gold and silver are both under a little pressure today following the pickup in the US Dollar.
Silver prices have been harder hit, owing to the downside move in equities. Gold prices are
mostly flat so far today as price continues to stagnate, marking its fourth day of such price
action as traders struggle to build momentum on either side of the market.

Crude Soars Almost 4% on EU-Russian Embargo News

Oil prices have ballooned higher today. Crude futures are almost 4% higher on the day
following yesterday’s announcement. EU leaders yesterday announced a partial ban will
come into effect, covering roughly two-thirds of Russian oil exports to the EU with levels set
to increase into year end, covering around 90% of Russian oil exports to the EU. The only
exception this will be for Hungary, Slovakia and Czech Republic, covering roughly 10% of
Russian oil exports to the EU. The news has resharpened the focus on tightening supply in
the oil market and should keep prices well supported in the near-term.