Currencies steady as markets weigh Ukraine crisis from buzai232's blog

Mounting tensions between Russia and Ukraine at the end of last week turned investors’ attention towards safe heaven currencies, boosting the dollar and the Yen, while the Euro retreated.To get more news about topfx reviews, you can visit wikifx.com official website.

Hopes for a diplomatic resolution to the issue were diminished on Monday, as Vladimir Putin signed a decree recognising the independence of the two separatist regions Donetsk and Luhansk in eastern Ukraine. Immediately afterward, he ordered Russian troops into these regions, in a ‘peacekeeping’ mission as he stated, violating Ukraine’s sovereignty and effectively launching an invasion against Ukraine.

The US President announced on Tuesday the "first tranche" of measures against Russia, which aim to deliver a hard blow on the country’s economy, including sanctions on Russia's foreign debt so that the country can no longer raise money for its state financing. Australia, Canada, and Japan have also announced sanctions against Russia, targeting Russian banks and oligarchs, while NATO has positioned additional US troops to the Baltic nations bordering Russia.

The EU foreign policy chief Josep Borrell stated that EU members states have unanimously agreed upon a package of new sanctions against Russia. More importantly, Germany has suspended the approval of the Nord Stream 2 pipeline, a move that may cause an energy crisis in Europe, which depends on Russia for approximately 40% of its gas and send the prices of energy-related assets even higher. Britain has moved to sanction Russian individuals and banking institutions in the UK, while it is reported that further sanctions are on the table.

Safe-haven currencies, such as the dollar and the Yen, are expected to benefit from these recent developments as demand for safer assets grows. However, Russia’s move against Ukraine has been anticipated for some time now and may have largely been priced in by markets. Further developments are expected though and may cause high market volatility in the coming weeks.
US Flash Manufacturing PMI, Flash Services PMI, and CB Consumer Confidence data were released on Tuesday and were mostly positive for the US economy. These are leading indicators of economic health and provide support for the dollar, as signs of economic recovery may steer the Fed’s monetary policy towards a more hawkish direction.

Rising inflation rates in the US support the dollar, amidst expectations that the Federal Reserve might tighten its monetary policy to tackle inflation. Monthly Retail and Core Retail Sales released last week were higher than expected, indicating that the US economy is moving in a positive direction, also fuelling expectations of a sharp increase in the Fed’s interest rates.

The Federal Reserve has so far indicated that it will tighten its monetary policy to fight soaring inflation rates in the US. It is not clear, however, to what extent the US Central Bank intends to increase its interest rates, and there is wide speculation on the subject, causing uncertainty and market volatility. A series of rate hikes have already been priced in by the markets, with many investors predicting a sharp benchmark interest raise of 50 base points in March.

The dollar index climbed higher on Wednesday, reaching 96.2, boosted by positive economic data and rising geopolitical tensions. The dollar is considered a safe-haven currency and rises when a risk-aversion sentiment prevails, as investors turn towards safer assets.

Several economic and inflation indicators for the dollar will be released on Thursday, including Quarterly Preliminary GDP, Unemployment Claims, US Crude Oil Inventories. These may cause volatility for the dollar, since economic, inflation, and employment data may influence the Fed’s future monetary policy. In addition, important inflation indicators are the Core PCE data, which is scheduled to be released on February 25th. The next meeting of the US Central Bank in March is drawing near and indicators of inflation are expected to affect the Fed’s decision to raise its benchmark interest rate.