Equities Rally, Euro Strengthens on Wednesday

All commodities are rising sharply, further fueling inflation pressures. For example, the US oil traded at 125 USD, while the EU benchmark jumped to 140 USD, likely sending the official inflation data over 10% in the following weeks. 

As a result, the 2-year US yield advanced to new cycle highs above 1.65%, implying the market is still pricing several rate hikes this year. This week's ECB decision on Thursday will likely shed some light as to how the central bank will deal with this situation as inflation has already run out of control, even before the war conflict in Ukraine. 

Due to heavily oversold conditions, EU and US benchmarks are trying to recover from the deep sell-offs, with relief rallies possible in the short term. All three US benchmarks are trading above their lows from 24 February, but EU indices suffered much heavier losses. 

Elsewhere, the USD retreated broadly as traders took some profits from the recent rally, pushing the EURUSD pair above 1.0950. Commodity-linked currencies also showed gains.

From the macro perspective, January JOLTS Job Openings and the EIA's weekly Crude Oil Stocks Change data are on the schedule today ahead of Thursday's critical US inflation report.