Ukraine developments dominate Geo-political tensions intensify.
Ukraine headlines have continued to dominate market moves. Sentiment was notably more constructive on Friday following reports that there could be peace talks between Russia and Ukraine in Minsk.
Over the weekend, the EU announced additional sanctions against Russia while there was a notable U-turn from Germany as it announced a big increase in military spending and also announced that it would send arms to Ukraine.
Western countries announced that they would look to block Russian access to currency reserves and many Russian banks will be frozen out of the SWIFT system.
The EU also announced that it had closed airspace to all Russian aircraft. Russian President Putin announced that Russian nuclear forces would be put on special alert and there were attacks on Ukraine from Belarus.
The market mood was much more positive on Friday with big gains across risk assets with the S&P 500 index, for example, gaining 2.2% while there were substantial gains for wider risk assets and a dip in demand for defensive assets.
The latest headlines triggered a renewed dip in confidence as markets re-opened in Asia on Monday.
US equity futures declined sharply while there was fresh demand for the yen, Swiss franc and dollar.
Overall risk assets came under renewed pressure while there was a fresh spike in oil prices and jump in precious metals. The Russian rouble crashed to fresh record lows with a 30% slide.
Oil prices posted net losses on Friday, although global benchmarks did recover from intra-day lows.
Prices jumped again in Asia on Monday as Ukraine fears increased again. Although there were no direct measures against Russian energy exports, markets were more concerned over the threat of supply disruption. Brent spiked to highs above $101.0 p/b before a correction to around $99.50 p/b.
The US core PCE prices index increased 0.5% for January which was in line with expectations while the year-on-year rate increased to 5.2% from 4.9% and slightly above market expectations of 5.1%. Personal spending increased 2.1% for January after a revised 0.8% decline the previous month.
Markets continue to expect that the Federal Reserve will increase interest rates at the March policy meeting with expectations that there will be a 0.25% rate hike unless there is a quick resolution to the Ukraine crisis.
There will be an important element of month-end position adjustment during Monday, especially around the London fix. The sharp move in equities will tend to increase the impact and potentially underpin the dollar, although the impact is liable to be swamped by wider trends in risk appetite.
Currency market volatility has inevitably remained high over the past 24 hours. Risk conditions strengthened sharply on Friday with a slide in demand for defensive assets.
There was, however, a sharp reversal in Asia on Monday as Ukraine headlines dominated. The Euro came under heavy selling pressure while the dollar, yen and Swiss franc gained defensive support. EUR/USD dipped to lows near 1.1130, but held above 20-month lows and traded just above 1.1150. US yields were resilient and USD/JPY consolidated around 111.50.
EUR/CHF posted sharp losses to near 1.0320 before stabilising. Sterling struggled to make headway on Friday and dipped in Asia as risk assets came under renewed pressure. GBP/USD dipped to lows below 1.3325 before recovering.
Commodity currencies retreated again on Monday but held above lows seen last week. AUD/USD traded around 0.7190 ahead of the Reserve Bank of Australia policy decision. USD/CAD hit selling above 1.2800 and settled around 1.2785.
|07:30||CHF Retail Sales (Y/Y)(JAN)||-0.40%|
|08:00||CHF KOF Leading Indicator(FEB)||107.8|
|08:00||CHF GDP (Y/Y)||3.20%||4.10%|
|08:00||CHF GDP (Q/Q)||1.70%|
|13:30||USD Goods Trade Balance(JAN)||-100.47B|
|13:30||USD Core Retail Sales (M/M)(FEB)||3.30%|
|13:30||CAD Current Account (Q/Q)||4.8B||1.4B|
|13:30||CAD RMPI (M/M)(JAN)||-2.90%|
|14:45||USD Chicago PMI(FEB)||61.7||65.2|
|21:30||AUD AiG Performance of Manufacturing Index(JAN)||48.4|