- Russia-backed rebels accused Ukrainian forces of shelling their territory
- Russia has amassed more than 100,000 troops close to Ukraine's borders
- The euro fell as much as 0.4% as traders immediately saw risks of a wider war
The U.S dollar index was down yesterday, hitting its lowest level since Friday after minutes from the last U.S. Federal Reserve meeting suggested policymakers are not set on a particular pace of interest rate hikes.
According to the January meeting minutes released yesterday, Fed officials last month agreed that, with inflation widening its grip on the economy and employment strong, it was time to tighten monetary policy, but also that decisions would depend on a meeting-by-meeting analysis of data.
Strategists said the minutes suggested policymakers may not be as hawkish as investors feared. Members were not as aggressive as some had expected, which is being reflected in the modest sell-off of the dollar. We are taking these minutes with a grain of salt anyway, as the meeting happened before the recent CPI and PPI data, which were considerably higher than the forecast.
Economic Calendar
Earlier this week, St. Louis Fed President James Bullard reiterated calls for a faster pace of Fed rate hikes, and stronger-than-expected U.S. economic data including Wednesday's U.S. retail sales data have helped to underscore that view. Those expectations have helped to give support to the dollar in recent sessions. At the Fed's Jan. 25-26 meeting, policymakers agreed that it would "soon be appropriate" to raise the Fed's benchmark overnight interest rate from its near-zero level.
President Joe Biden said that a Russian attack on Ukraine remains a possibility
On the geopolitical front, the United States and NATO said Russia was still building up troops around Ukraine on Wednesday despite Moscow's insistence it was pulling back. Russia-backed rebels accused Ukrainian forces of shelling their territory in violation of agreements aimed at ending the conflict in the contested Donbas area, the RIA news agency said, a report later denied by Ukraine. Russia has amassed more than 100,000 troops close to Ukraine's borders and the West has threatened Russia with new sanctions if it attacks.
Euro
The single currency fell as much as 0.4% today in the Asian session as traders immediately saw the risks of a wider war. But Ukraine's denial and the location of the reported attack within already contested territory calmed things. The standoff on Europe's eastern edge is one of the deepest crises in East-West relations for decades. Overall, the EUR/USD traded with a low of 1.1343 and a high of 1.1394 before closing the day around 1.1371 in the New York session.
Investors are lost in the fog of war and that’s why we are seeing this volatility
Yen
The Japanese Yen traded lower despite Japan's exports rising 9.6% in January from a year earlier, Ministry of Finance data showed today. The rise was weaker than the 16.5% increase expected by economists in a Reuters poll and follows the growth of 17.5% in December. January imports rose 39.6% year-on-year, versus the median estimate for a 37.1% increase. Overall, the USD/JPY traded with a low of 115.33 and a high of 115.77 before closing the day around 115.47 in the U.S session.
British Pound
The British Pound gained as Britain's inflation rate hit its highest since March 1992 in January when it rose to 5.5% and is expected to extend its climb to above 7% in April, prompting fears of the sort of wage-price spiral that once dogged the country's economy. The market is looking at two central banks that are both hawkish. Overall, the GBP/USD traded with a low of 1.3529 and a high of 1.3599 before closing the day at 1.3583 in the New York session.
Tensions in Eastern Europe pushed demand for the dollar and the safe-haven yen
Canadian Dollar
The Canadian Dollar strengthened against its U.S counterpart as oil prices rose and domestic data showed inflation further heating up in January. Canada's annual inflation rate accelerated in January to a 30-year high of 5.1%, as food and housing costs continued to rise, while the average of the Bank of Canada's three core measures rose to 3.2%. Overall, USD/CAD traded with a low of 1.2661 and a high of 1.2723 before closing the day at 1.2684 in the New York session.
Australian Dollar
The Australian Dollar heading for the third day of gains as markets remained optimistic on Ukraine and local data showed the labor market had weathered a wave of coronavirus cases. Australian data showed the economy still managed to create a net 12,900 jobs in January even as an Omicron COVID-19 wave slugged activity, keeping unemployment at a 13-year low of 4.2%. Overall, AUD/USD traded with a low of 0.7169 and a high of 0.7228 before closing the day at 0.7171 in the New York session.
The United States said Russia has massed enough troops near Ukraine to launch a major invasion
Euro-Yen
EUR/JPY is trading below 14, 50 and 100 days moving average. Fast stochastic is giving a bearish tone and MACD is also issuing a bearish stance. The Relative Strength Index is above 41 and lies below the neutral zone. In general, the pair has gained 0.03%.
Sterling-Yen
Currently, GBP/JPY is trading below 14 and above 50, 100 days moving average. Fast stochastic is issuing a bearish tone and MACD is also indicating a bearish stance. The Relative Strength Index is above 45 reading and lies below the neutral zone. On the whole, the pair has gained 0.25%.
Aussie-Yen
Currently, the cross is trading above 14, 50 and below 100 days moving average. Fast stochastic is giving a bearish tone and MACD is also indicating a bearish stance. The Relative Strength Index is above 43 reading and lies below the neutral region. In general, the pair has gained 0.55%.
Euro-Sterling
This cross is currently trading below 14, 50 and below 100 days moving average. Fast stochastic is indicating a bullish tone and MACD is also issuing a bullish signal. The Relative Strength Index is above 44 and lies above the neutral region. Overall, the pair has lost 0.22%.
Sterling-Swiss
This cross is trading above 14, 50 and 100 days moving average. Fast stochastic is issuing a bearish stance and MACD is also indicating a bearish tone. The Relative Strength Index is above 46 and lies above the neutral region. In general, the pair has gained 0.04%.
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