USD Safe Haven Flows as Russia/Ukraine Ratchets Up

AUD

Highly volatile market conditions as the news of Russia’s invasion of Ukraine broke early yesterday afternoon. All eyes are fixed on eastern Europe as the Russians brought the west's fears to reality with a full-scale war breaking out on the eastern border of Ukraine. Sanctions were the talk of the day as the US and NATO allies drop heavier sanctions on Putin’s Russia in an attempt to punish their economy. Economic data is expected to take a backseat over the coming days as the full impact of the invasion of Ukraine unfolds. The ASX like much of the Equity market globally suffered having fallen by 3% in the last 24 hours. The Shanghai Comp fared a little better yet still suffered 1.7% losses with the NIKKEI faring similarly, also down -1.8%. In Commodities Iron Ore was down 0.8% while Gold was down -1.9% again (after having seen an influx of early investments in the safe haven commodity with the breaking of the Russia/Ukraine news.) We will not be seeing any major local economic market data releases for the next few days until next week Tuesday when the RBA will finally have to decide on possible increases to the Cash Rate.

USD

Massive trading ranges with the AUDUSD pair since the last report, having plummeted from a one and a half month high of 0.7284 plunging to a low of 0.7095 where it finally found support to retrace to currently 0.7161 at time of writing. New US sanctions on Russia in an attempt to cripple the Putin Presidency have been announced by the Biden administration last night. Despite this these sanctions not expected to severely target the energy sector reported Politico on Thursday. Russian energy giant Rosneft is not expected to be a target of a new sanctions package. Whilst failure to target Russia's energy sector and deal the country currently in the process of invading Ukraine the most severe economic pain may draw ire from some critics pushing for a stronger response, a softer US response may be treated positively by markets. If the Russian energy sector is not targeted, this would lower the potential global inflationary risks associated with the current Ukraine/Russia conflict, lessening one layer of uncertainty. In Commodities Crude Oil up 0.4% as expected while Equities were mixed with DOW JONES down 0.5%, while the S&P 500 was up 0.3% and NASDAQ rebounded to gains of 2.2%. US local data will be taking a back seat to the Ukraine/Russia conflict despite a number of releases published this morning. With that said, the Prelim GDP q/q data came in as expected at 7.0% against previous of 6.9%. Unemployment Claims came in at 232K just lower than expected 233K a little less than previous of 249K. Crude Oil Inventories came in significantly higher at 4.5M blowing expected-1.0M out of the water against previous of 1.1M. No major surprise here considering Russia’s largest Commodity export is crude oil and the market responded as one would expect as a result of the war, and sanctions aimed at the Kremlin. FOMC Members have been speaking about economic outlook throughout the night with Member Waller set to speak at 12:25 tonight, though significant eyes are mostly focused elsewhere. Looking ahead early Saturday morning we will see Core PCE Price Index m/m data, followed by Durable Goods Orders m/m.

EUR

The Aussie dollar is faring quite well against the Euro in current market conditions, opening flat this morning after falling from a two-month high of 0.6427 overnight, currently trading at 0.6392 at time of trading. The EZ sit uneasy watching the unfolding events of the Russian Invasion of Ukraine, standing in solidarity with NATO allies in dropping significant sanctions on Russia in retaliation to the war, including the end of the multi-billion Euro Nordstream 2 gas pipeline. Many commentators are quite critical of the EU’s response to Russia, claiming these sanctions are more “bark than bite”. In equities the DAX fell by 4.0% which was no surprise considering the current risk climate of the market. Although not the focal point of the European markets at the moment, later tonight we will see a number of smaller local data releases in the form of German Final GDP q/q, German Import Prices m/m, French Consumer Spending m/m, French Prelim CPI m/m, French Prelim GDP q/q along with the M3 Money Supply y/y.

GBP

In highly volatile market conditions the AUDGBP pair has found itself in large trading ranges opening at one and a half month highs of 0.5357 at time of writing. UK PM Johnson stood shoulder to shoulder with NATO allies in issuing major sanctions on Russia after the news of the Ukrainian invasion broke, resulting in some choppy trading conditions in the following 24 hours. In Equities the FTSE much like its contemporaries suffered, falling by -3.9% which was no major surprise. BOE’s Governor Bailey spoke last night as traders attempted to decipher interest rate clues with an interested eye fixed on possible cash rate changes, the other eye fixed upon the unfolding events in the east. There will be no major economic market data releases in the next few days out of the UK Market, but it is difficult to say it will be a quiet few days throughout Europe and UK.

NZD

The AUDNZD pair has seen choppy trading conditions, currently trading higher at 1.0709 at time of writing, both risk sensitive commodity currencies highly susceptible to volatile market conditions such as what we are seeing today. The AUD has been losing ground against its little cousin from across the ditch, yet has seen a bit of a rebound since the beginning of today’s trading session.

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