The first quarter of 2022 was shaping up to be the most euphoric of recent times as most nations further strengthened their defense against the COVID pandemic, wound down their restrictions and prepared to ‘live with the virus’. However, the supply bottlenecks caused by surging demand saw inflation soar across most of the globe. In Europe, inflationary pressures would become secondary issues as tensions between Russia and Ukraine intensified, resulting in the deployment of Russian troops throughout parts of Ukraine.

This conflict between the nations has sparked global outrage, with most western nations imposing harsh economic sanctions on Russia. The financial markets reacted in a turbulent manner, seeing US equities enter into a ‘correction’ for the first time since the outbreak of the COVID-91 pandemic.

The most notable volatility, however, occurred across commodity markets as fears of large-scale conflict drove the price of Brent crude oil above $138 per barrel. Towards the end of Q1, prices retreated from their highs as peace talks between the two countries ensued but commodity prices still remain inflated and there are more structural tailwinds for prices to remain inflated indefinitely.

Post-market pandemonium, global markets shifted their interest back towards central bank monetary policy tightening, which has been expedited in the wake of the elevated commodity prices. The interest rate market has been particularly influential on the FX markets as investors sized up how the various central banks would respond to the current economic influences.