Ukraine fears continue to dominate.
Risk conditions continued to dominate market moves during Monday with sentiment, in turn, influenced strongly by developments in Ukraine.
Markets continued to monitor rhetoric closely with a brief rebound in risk appetite following comments from Russian Foreign Minister Lavrov that there was scope for diplomatic progress.
US President Biden and UK Prime Minister Johnson also stated there was a glimmer of hope for diplomacy, although tensions remained extremely high.
German Chancellor Scholz stated that he expects clear steps from Russia for de-escalation and is scheduled to meet Russian President Putin on Tuesday amid reports that there was a further build-up of military forces on the border. There has also been further speculation that an attack on Ukraine is imminent.
Wall Street equities posted limited net losses on Monday and global bourses overall remained on the defensive amid Ukraine fears.
Speculation over a Chinese interest rate cut provided an element of support to risk conditions in Asia on Tuesday.
Oil prices held close to 7-year highs while there was further demand for precious metals.
Kansas City Fed President George stated that the central bank had to be systematic in monetary policy and that it was always preferable to be gradual while she did not back a really fast move to neutral rates. She did add that the Fed would have debate a 0.50% rate hike at the March meeting of the data demanded it.
Richmond Fed President Barkin stated that it was time to normalise policy and underlying demand is strong.
Given the geo-political tensions, there was a slight dip in expectations that the Fed would opt for a 0.50% rate hike at the March meeting.
The UK unemployment rate held at 4.1% in the three months to December. Provisional January data was strong with a reported increase of 108,000 in payrolls to a fresh record high.
Average earnings increased 4.3% in the year to December, above expectations of 3.8%, and there was very strong data for January single-month data with an annual increase of the 6.3%. The data maintained expectations that the Bank of England would push ahead with further interest rate increases.
Risk conditions tended to dominate during Monday with choppy trading, although currency market moves were relatively contained.
The yen maintained a firm tone with USD/JPY trading around 115.30 from 115.65 highs as US bond yields edged lower.
The Euro was unable to sustain gains as ECB President Lagarde expected inflation pressures to peak.
The dollar continued to gain an element of defensive support, especially against commodity currencies. EUR/USD did find support below 1.1300 and traded around 1.1320 on Tuesday.
Defensive currencies maintained a firm underlying tone with EUR/CHF retreating to around 1.0450.
GBP/USD found some support below 1.3500 and traded around 1.3535 after solid jobs data with GBP/EUR holding above 1.1950.
USD/CAD retreated from highs around 1.2785 to 1.2735 as high oil prices cushioned Canadian dollar selling. Weaker risk appetite hampered the Australian dollar with AUD/USD around 0.7120.
The Swedish krona remained vulnerable with EUR/SEK at 21-month highs around 10.70 before a slight correction.
|07:00||GBP Average Earning Including Bonus(DEC, 2021)||4.20%|
|07:00||GBP Claimant Count Change(M/M)(JAN)||-43.3K|
|07:00||GBP Unemployment Rate(DEC, 2021)||4.10%|
|10:00||German ZEW Survey (Economic Sentiment)(M/M)(FEB)||51.7|
|10:00||German ZEW Survey (Current Situation) (FEB)||-10.2|
|10:00||Euro-Zone GDP (Q/Q)||2.20%||0.30%|
|10:00||Euro-Zone GDP (Y/Y)||3.70%||4.60%|
|10:00||Euro-Zone Trade Balance(DEC, 2021)||-1.5B|
|10:00||EUR Euro-Zone ZEW Survey (Economic Sentiment)(FEB)||49.4|
|13:15||CAD Housing Starts(JAN)||270.0K||236.1K|
|13:30||USD PPI Ex Food & Energy (M/M)(JAN)||0.50%|
|13:30||USD PPI Ex Food & Energy (Y/Y)(JAN)||8.30%|
|13:30||USD PPI (Y/Y)(JAN)||9.70%|
|13:30||USD PPI (M/M)(JAN)||0.20%|
|13:30||NY Empire State Manufacturing Index(FEB)||25||-0.7|
|21:00||USD TIC Net Long-Term(DEC, 2021)||137.4B|