Russian Peacekeeping Mission into Ukraine Announced this Morning

AUD

AUD faring better than expected in a risk-off environment driven largely by the ongoing tensions in Ukraine. Macquarie Strategy note that this has the potential to become the biggest armed conflict in Europe since 1945. The tame market reaction to Russia’s annexation of Crimea in 2014 should not be taken as a template for the current episode; this time the market reaction could be far more aggressive and sustained, especially if the flow of gas to Western Europe is interrupted. RUB, EUR, and AUD look particularly exposed to headline shock – especially if US equities fall sharply. A quiet day of data for the Aussie today. Asian equities finished the session largely in the red with the Nikkei the worst performer down 0.8%. The ASX outperformed its peers up 0.2% on Monday’s close, with news that Biden and Putin had agreed to meet, leading a rally for the index. A mixed performance of commodities overnight, with gold, silver and iron ore gaining 0.4%, 0.3% and 0.7% respectively, and copper losing out 0.8%. For this week of Aussie data a quiet one as well, with Wednesday seeing Wage Price Index q/q being released. In late news this morning Russia President Putin has announced a peacekeeping mission in to Ukraine, AUD initially weaker.

USD

AUD opens higher this morning at 0.7192 having traded well into the 0.72s overnight. It was news yesterday that a French-brokered summit between Biden and Putin had been agreed to by both parties and the resulting boost to risk appetite immediately pushed AUD higher, before falling off in the overnight session. The Dow Jones and the S&P 500 both performing poorly, losing out 0.7% a piece. Oil rose 3.2% to $93.95 a barrel in another sign of heightened tensions in Europe. This evening, Flash Manufacturing PMI and Flash Services PMI are both to be released in the US, as well as CB Consumer Confidence. Markets will be nervously awaiting a response from the West to the recently announced Russian peacekeeping mission into the Ukraine. The USD will be a major beneficiary of any further deterioration in global risk appetite.

EUR

AUD has continued to trudge north here, opening at 0.6355 and having gained 2 cents in the last two weeks. The DAX and the CAC performed poorly overnight, coming in 2.1% and 2.0% lower respectively as risk weighed heavy on investors. Yesterday a mixed day of data out of the EU, with German PPI m/m coming out at 2.2% against an expected 1.6%, French Flash Services coming out at 57.9 against a projected 54.0, German Flash Manufacturing PMI data not exceeding expectations coming in at 58.5 against the anticipated 59.6, however German Flash Services PMI exceeding expectations coming in at 56.6 despite an expected 53.2. Flash Manufacturing PMI for the whole  EZ came in at 58.4, missing projections of 58.9, and Flash Services PMI coming in positively at 55.8 above expectations of 52.3. Little in the way of data from Europe this evening, the developing situation in the Ukraine at the forefront of market participants concerns.

GBP

AUD opening only marginally higher here at 0.5285 in what has been relatively range-bound trading over the last two weeks. The FTSE came in 0.4% lower this overnight, reflective of the quickly souring risk sentiment. Last night in UK data, Flash Manufacturing PMI came in at 57.3 just above expectations of 57.2, and Flash Services PMI came in at 60.8, significantly above expectations of 55.6. These positive numbers will be noted by the Bank of England and play a part in their deliberations over the requirement for further interest rate hikes. No data of note from the UK tonight, however plenty for markets to consider with the happenings in Ukraine.

NZD

AUD marginally higher this morning here as well, opening at 1.0726. AUD has traded exclusively in the 1.07s for the last two weeks, however this may come to an end tomorrow with the next opportunity for the RBNZ to raise interest rates. At midday tomorrow the Official Cash Rate, RBNZ Monetary Policy Statement, RBNZ Rate Statement, and the RBNZ Press Conference will be released, markets are expecting a third consecutive 25 basis point interest rate hike, which would leave rates at 1.00% if correct.