Forex News
Standard Chartered Bank economists Saurav Anand and Anubhuti Sahay highlight a sharp slowdown in India’s new investment announcements in March, heavily affected by the Middle East conflict and sector-specific issues in renewable electricity and chemicals. Projects under implementation (PUI) were distorted by technical reclassification, while project completions surged to their second-highest level ever. The overall investment outlook is seen as subdued given external sector uncertainty and demand risks.
Middle East shock and sectoral softness
"The Middle East conflict impacted new investment plans more than existing investment. The conflict soured sentiment, with new announcements plunging 90% y/y in March."
"However, not all of the decline in new announcements was due to the Middle East war. While the decline in new announcements in March is understandable, it was significantly weak in February as well, primarily led by renewable electricity generation and the chemical sector."
"Given that renewable electricity generation and the chemical sector are usually important contributors to new project announcements (40% of new announcements in the quarter of March 2025 came from these sectors), the softness in these sectors led to one of the weakest new announcements for the March quarter (contracted 57% y/y); this was the weakest March quarter for new announcements since 2021, when it was impacted by COVID."
"Will slower new announcements impact future PUI? While such a possibility cannot be ruled out, the correlation between new announcements and implementation is not very strong, especially for the March quarter, as large announcements are typically made during investment summits."
"Key positive during the quarter was a pick-up in the pace of project completions. Project completions in the March quarter were the second-highest quarterly total ever, surpassed only by the pre-election quarter of March 2024."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
- EUR/JPY accelerates its recovery, reaching 186.50, with YTD highs at 186.88 on sight.
- Rumours of a peace deal in Ukraine have sent the Euro higher across the board on Friday.
- Higher inflation in the Euro area and Japan raises concerns about the economic consequences of Iran's war.
The Euro (EUR) appreciates against its main peers on Friday, boosted by news reporting that Russia and Ukraine might be close to a peace deal. The EUR/JPY pair has extended its rally from mid-March lows at 182.00 to 186.50 so far, bringing the year-to-date high at 186.88 into focus.
The Euro has been boosted by a Bloomberg report citing comments from a top aide to Ukrainian President Volodymyr Zelenskyy, who suggested that Kyiv might be close to reaching a peace agreement with Russia.
Beyond that, Moscow has declared a 32-hour ceasefire for Orthodox Easter, and a top Kremlin official affirmed that there can be peace on Friday if Zelenskyy makes the decision, adding that Russia wants peace, rather than a ceasefire.
The Euro tread water before that, as market concerns about the fragility of the peace agreement in Iran had kept risk appetite subdued. In the economic calendar, German Consumer Prices Index data for March, released earlier on Friday, confirmed persistent inflationary pressures stemming from Iran's war and added pressure on the European Central Bank (ECB) to hike interest rates soon.
On Thursday, the Japanese Producer Price Index (PPI) showed a 2.6% year-on-year increase in March, up from 2.1% in February, while the monthly PPI jumped to 0.8% from 0.1% in the previous month. These numbers confirm the inflationary impact of the Middle East war and put pressure on the Bank of Japan to hike interest rates in the coming months.
(This story was corrected on April 10 at 13:35 GMT to say that Japan's PPI in February was 2.1% instead of 2%.)
Inflation FAQs
Inflation measures the rise in the price of a representative basket of goods and services. Headline inflation is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core inflation excludes more volatile elements such as food and fuel which can fluctuate because of geopolitical and seasonal factors. Core inflation is the figure economists focus on and is the level targeted by central banks, which are mandated to keep inflation at a manageable level, usually around 2%.
The Consumer Price Index (CPI) measures the change in prices of a basket of goods and services over a period of time. It is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core CPI is the figure targeted by central banks as it excludes volatile food and fuel inputs. When Core CPI rises above 2% it usually results in higher interest rates and vice versa when it falls below 2%. Since higher interest rates are positive for a currency, higher inflation usually results in a stronger currency. The opposite is true when inflation falls.
Although it may seem counter-intuitive, high inflation in a country pushes up the value of its currency and vice versa for lower inflation. This is because the central bank will normally raise interest rates to combat the higher inflation, which attract more global capital inflows from investors looking for a lucrative place to park their money.
Formerly, Gold was the asset investors turned to in times of high inflation because it preserved its value, and whilst investors will often still buy Gold for its safe-haven properties in times of extreme market turmoil, this is not the case most of the time. This is because when inflation is high, central banks will put up interest rates to combat it. Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold vis-a-vis an interest-bearing asset or placing the money in a cash deposit account. On the flipside, lower inflation tends to be positive for Gold as it brings interest rates down, making the bright metal a more viable investment alternative.
Brown Brothers Harriman’s (BBH) Elias Haddad notes that global markets are cautious ahead of US-Iran ceasefire talks, with Brent, equities and bonds reacting while the Dollar stabilizes. He argues that if shipping security fears have peaked, risk appetite can improve and US Dollar Index (DXY) should trade in a 96.00–100.00 range, while maintaining a structurally bearish US Dollar (USD) view tied to US policy, fiscal and Fed politicization concerns.
Risk, inflation and Fed easing outlook
"Markets are trading on a cautious tone ahead of the US-Iran ceasefire talks planned this weekend in Islamabad. Brent crude oil prices are up 8% from Wednesday’s low, US stocks are churning, European stocks are up, global bond yields ticked higher but remain below their end-March highs, and the dollar’s decline stabilized."
"For financial markets, the key issue is whether peak shipping security fear is now behind us. President Donald Trump’s openness to Iran’s 10-point proposal, including recognition of its sovereignty over the crucial Strait of Hormuz, as “a workable basis on which to negotiate” suggests the worst of the shipping risk panic may be in the rear-view mirror."
"If so, risk appetite can improve further and anchor the DXY (USD index) within a 96.00-100.00 range. Structurally, we maintain our long-held bearish USD view because of fading confidence in US trade and security policy, worsening US fiscal credibility, and the ongoing politicization of the Fed."
"As long as US underlying inflation and inflation expectations remain contained, the Fed will have room to resume easing to support the labor market and near stagnant consumer spending activity. Real personal spending growth undershot consensus at 0.1% m/m in February (consensus: +0.2%) vs. 0.0% in January (revised down from +0.1%)."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
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