Dollar shines but euro slips on geopolitics
The ongoing Russian invasion in Ukraine, alongside the tough Western sanctions and their imminent effects on the global economy continue to be the key drivers for the markets today. Although a new round of negotiations between the two countries is taking place at the moment of writing, there are not any concrete signs of de-escalation so far, thus volatility is expected to remain high. These recent developments in the Ukrainian crisis seem to be increasing risk aversion in markets but positive news from the ongoing meeting could alter investors’ sentiment.
The US dollar is trading higher on the day, capitalizing on the mild risk-off mood in markets despite the weakness observed in US Treasury yields. In addition, the dollar got an extra boost as the weekly jobless claims decreased to 215k against the 225k projection, providing optimistic signals about the upcoming NFP report on Friday and the overall health of the US labor market. On the other hand, the euro is losing ground for a fourth consecutive day as soaring risk aversion and the softer-than-expected February PMI reading for the Eurozone are acting as a headwind for the single currency.
Elsewhere, the Australian dollar is the absolute winner in the forex spectrum, supported by the booming commodity prices and the increasing bets for faster hikes by the RBA.
US futures edge higher despite initial retreat
Wall Street is set to open higher today and extend yesterday’s gains as the major indexes’ futures are trading higher in pre-market trade. Fed Chair Jerome Powell noted yesterday that the central bank is going to ‘proceed carefully’ with its rate hike timeline in order to avoid a market overreaction. This statement improved market sentiment and enabled indices to storm higher, but the persistently high inflation, the elevated energy prices, and the absence of signs that Russia is going to stop its invasion soon continue to pose downside risks for the US stock markets.
Oil rally eases; gold ticks down
Despite rallying early in today’s session, WTI futures have surrendered a huge part of their gains as an imminent Iran nuclear deal, which is expected to improve oil’s supply outlook, is drawing closer. On the other hand, gold is on the retreat following US jobless claims data release, heavily pressured by the stronger dollar, while the softer US Treasury yields and the moderate risk-off sentiment in markets seem to be capping its downside.
Main events coming up
The ISM services PMI report for February is due at 15:00 GMT today and is expected to inch higher to 61 from 59.9 in January. However, it is unlikely to affect the pace and timing of the Fed’s rate hike timeline as the central bank is more focused on inflation than growth outlook.
