Friday February 25th Morning Update

The US$ unchanged, oil prices lower, equity markets higher and US yields unchanged. Full scale invasion is underway as UN hold briefing. U.S., EU announce new wave of sanctions. China, which signed a friendship treaty with Russia three weeks ago, has refused to describe Moscow’s actions as an invasion. Financial sanctions imposed by the West are easier than ever for Russians to evade due to the popularity of cryptocurrencies. In other news.  Australia accuses China of enabling Russian aggression. While the market continues to focus on geopolitical news, the US labor department reported that the average number of continuing claims over the past four weeks declined to just below 1.6 million, marking the lowest level since the week of June 30, 1973. COVID. The coronavirus mutant widely known as “stealth omicron” is now causing more than a third of new omicron cases around the world, but scientists still don’t know how it could affect the future of the pandemic. CDC to significantly ease pandemic mask guidelines. In currency markets. AUD and NZD rebounded from yesterday’s selloff by moving higher by 0.6% and 0.4% respectively. The CNY appreciated by 0.2% against the USD while the INR strengthen by 0.45%.

USD/CAD moves back above 1.2800, remains supported by Russia’s move on Ukraine. The pullback in oil prices undermined the Loonie and further extended support. US CPI and Durable Goods order are to be released this morning; the impact of the release will probably be minimal as market focuses on Ukraine’s invasion. Yesterday’s support of 1.2765 held while remains at 1.2874.

it appears that some ECB hawks are easing their hawkish tone amid the Ukraine conflict. Ukraine war may shave 0.3%-0.4% off eurozone 2022 GDP. Yesterday’s intense flight to safety weighed heavily on the EUR/USD where it registered its largest one-day decline since November. Geopolitical remains the key focus of market participants. The 1.1100 area remains an area of importance for the pair and expect to offer support while resistance resets at 1.1215.

A risk-off market mood caused a fluctuation in the pair, benefitting the low-yielder euro. The pair bounced off the 2022 lows which remains our support area 0.8300 while we can expect the move to be capped at 0.8400.

BoE’S Mann quoted as saying that little in data shows a reduction in inflation expectations. Furthermore, If inflation dynamics of 2021 are repeated in 2022, inflation will exceed BOE’s forecasts. While the GBP rebounded from yesterday’s low, it still remains under pressure.  Support remains at 1.3350 while resistance adjusts to 1.3425.