Ukraine concerns increase again.

NATO officials were notably cautious over the Ukraine situation on Wednesday and continued to express important reservations on Thursday.

Risk conditions tended to drift lower during the day and after the European close there were reports that Russian forces were moving closer to Ukraine’s border which triggered fresh alarm.

Overall confidence remained fragile on Friday, but there was an element of relief following reports that US Secretary of State Blinken and Russian Foreign Minister Lavrov would meet next week.

Overall risk appetite was fragile during Thursday with markets still attempting to gain a read on the Ukraine situation amid the flurry of rhetoric and accusations both sides in Eastern Ukraine. Expectations of monetary tightening also posted an element of underlying concern.

Equities lost ground and there was further underlying demand for defensive assets. The yen and Swiss franc posted net gains and gold was again in demand with a fresh 8-month high just above the $1,900 per ounce level.

US equity futures attempted to recover on Friday and demand for safe-haven assets eased slightly with gold edging lower.

There are no major data releases on Friday, but choppy market conditions are liable to continue with position adjustment an important element later in the day.

Investors will be wary over Ukraine developments while markets are closed and there is also a US holiday on Monday.

Markets overall are likely to be in a cautious mood unless there is evidence of a clear diplomatic breakthrough.

According to The Philadelphia Fed manufacturing index retreated to 16.0 for February from 23.2 previously and slightly below consensus forecasts of 20.0. There were also slower rates of growth for production, new orders and unfilled orders.

Employment increased at a faster pace on the month while the workweek increased at a similar rate. There was a slight easing of upward pressure on prices paid while prices received at a faster rate on the month. Companies remained optimistic over the outlook with further strong upward pressure on prices.

After mixed readings during January, the latest US manufacturing releases have been more positive. The data, however, failed to provide reassurance for equities.

UK retail sales volumes increased 1.9% for January following a revised 4.0% decline for December and above expectations of 1.0%. Annual sales increased 9.1% given the slump in January 2021 with core sales increasing 7.2% over the year.

Swedish consumer prices declined 0.5% for January with the year-on-year rate at 3.7% from 3.9% previously. Core prices increased 3.9% over the year with both metrics marginally above market expectations.

Risk conditions dipped again during Thursday as Wall Street equities posted net losses and Ukraine concerns increased again.

The yen and Swiss franc gained renewed defensive support during the day.

US bond yields edged also lower which sapped US currency support. USD/JPY dipped below the 105.00 level.

The Euro was resilient despite weaker risk conditions and Ukraine concerns. EUR/USD settled around 1.1360. There was a tentative recovery in risk on Friday with USD/JPY around 115.20. EUR/CHF dipped to 1.0450 before recovering slightly.

Sterling posted net gains despite weaker risk conditions with support from yields. GBP/USD broke above 1.3600 and held above this level on Friday. GBP/EUR also posted net losses to 2-week highs below 1.2000 before finding support.

Commodity currencies were unable to hold intra-day highs. AUD/USD dipped back below the 0.7200 level before edging back above this level on Friday. USD/CAD consolidated just below 1.2700 with a slight net paring of Canadian longs.

Scandinavian currencies drifted lower as risk conditions dominated. EUR/SEK traded around 10.56 after the CPI data.

Economic Calendar

07:00GBP Retail Sales (Y/Y)(JAN)-0.90%
07:00GBP Retail Sales (M/M)(JAN)-3.70%
07:00GBP Retail Sales ex-Fuel (Y/Y)(JAN)-3.00%
07:00GBP Retail Sales ex-Fuel (M/M)(JAN)-0.50%-3.60%
13:30CAD Retail Sales Ex Autos (M/M)(DEC, 2021)1.30%1.10%
13:30CAD Retail Sales (M/M)(JAN)1.20%0.70%
15:00USD Existing Home Sales(JAN)6.44M6.18M
15:00USD Existing Home Sales Change(JAN)-4.60%

*All rates shown are indicative of interbank rates and should only be used for indication purposes only. It is important to note that foreign exchange rates fluctuate and that rates may vary depending on the amount and the base currency that is purchased or sold. Rates are correct as of 8:00am UK time. CentralFX are not responsible for the rates shown.