Russian President Putin remains defiant.

Ukraine headlines and global ramifications have continued to dominate markets during the past 24 hours.  Russian President Putin reported as stating that Russia’s operation in Ukraine will be achieved in any case and adopted a hard-line stance with inflammatory rhetoric.

The Russian shelling of Ukraine’s largest nuclear power plant at Zaporizhzhia and a fire triggered fresh concerns on Friday with Russian forces reported as in control of the facility.

Peace talks made no headway, but with some reports that local cease-fires could be agreed with humanitarian corridors to allow evacuation of civilians.

Conditions were relatively calm within central Kyiv, but heavy shelling continued in other major cities and Kyiv was braced for an attack. There was increased pressure for Western action against Russian energy exports.

Overall risk sentiment remained very fragile on Thursday with further concerns over the ramifications of the Ukraine conflict.

As well as fears that the conflict would intensify, there were increased concerns over the global economic impact, especially with a fresh surge in energy and food prices which will trigger a fresh surge in inflation. Overall stagflation fears increased.

Global equities moved lower and there was net demand for defensive assets while oil prices traded close to 9-year highs.

The ISM services-sector index dipped to a 12-month low of 56.5 for February from 59.9 previously and well below consensus forecasts of 61.0 with a third successive decline.

There was also a sharp slowdown in the rate of growth in new orders and output while employment was reported as declining on the month, although this was related to an important extent by difficulties in hiring and people leaving the workforce. Prices increased at a stronger rate on the month and close to the fastest rate on record.

Cleveland Fed President Mester stated that it is critically important to get inflation under control and that the Ukraine crisis would put further upward pressure on inflation which makes it even more important for the Fed to take action.

She continued to back a gradual approach in the short term, but if there is no move down in inflation by the middle of the year she considered this would be a signal that accommodation needed to be removed at a faster pace.

Fed Chair Powell stated that rates could be increased by larger than 0.25% increments if inflation does not decline.

The latest US employment report will be released on Friday with consensus expectations of an increase in non-farm payrolls of just above 400,000.

Underlying data will also be significant with a focus on wages. The data will, however, have to be extremely weak to disrupt Federal Reserve plans for a 0.25% increase in interest rates this month.

Swiss inflation at 13-year high

Swiss consumer prices increased 0.7% for February, well above expectations of 0.3% and the year-on-year increase strengthened to 2.2% from 1.6% which was above consensus forecasts of 1.7% and the highest reading since November 2008. The higher inflation rate could lessen National Bank determination to prevent Swiss franc gains.

The Euro continued to be undermined by concerns over the Ukraine impact and fears over the Euro-zone outlook with expectations that ECB tightening was off the table for now.   EUR/USD dipped to fresh 21-month lows near 1.1000 in early Europe on Friday.

US bond yields were little changed on the day as Fed rate hikes remained on track. The yen was resilient amid underlying defensive demand with USD/JPY held around the 115.50 level.

Sterling was hampered by a slide in UK equities, although the currency was broadly resilient. GBP/USD was held below 1.3350 on Friday amid dollar gains. GBP/EUR however, rallied to a fresh 5-year highs around 1.2100.

The Swiss franc maintained a strong tone on defensive demand. EUR/CHF slumped to fresh 6-year lows around 1.0120.

There was further demand for commodity currencies, especially the Australian and New Zealand currencies. AUD/USD strengthened to 3-month highs around 0.7350. The Canadian dollar was unable to make further headway with USD/CAD just below 1.2700.

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