Russian troop build-up continues to dominate headlines

Good morning

European stocks fell sharply yesterday, led by fears of a Russian invasion of Ukraine. Russian troops reported to now be in Belarus on the northern border of Ukraine, while there is talk of possible NATO troop movements in Eastern Europe and the Baltic states. It seems highly unlikely that Putin will withdraw troops just because NATO ask him to, most reports I read suggest that an invasion targeting Kiev is imminent. Traditional safe haven currencies such as JPY and CHF have been in demand, USD is also a little firmer,

Possible rate rises by central banks were also partly to blame for the lower equity prices. FOMC rate announcement tomorrow, some wondering whether Fed will surprise the markets with an early rate rise but most still see this as a little too early and would go against the Feds own guidance. I don’t think they will want to spook the markets by acting now but I would expect to see some acknowledgement that March is very much live.

Sue Gray should give her report on No 10 parties during lockdown, coming just as news breaks of Boris Johnsons birthday parties held during lockdown in 2020 as well, albeit just for 10 minutes or so, but with 30 people attending at a time when gatherings were limited to just 2 people. It is quite likely that a member of staff just brought a cake to the office rather than it being a real party but with the ongoing party enquiry it is no surprise that this is being brought to our attention. GBPUSD currently 1.3475, well off the highs of 1.3750 seen in mid-Jan, while GBP also weaker again against EUR with EURGBP at 0.8380 (GBPEUR 1.1935).

Aussie inflation numbers came out higher than expected overnight, AUDUSD did push higher to 0.7175 initially but soon slipped back, although AUDNZD has held onto gains, now just a couple of pips short of 1.0700, so far unable to break through.

Singapore dollar is a little higher overnight after MAS adjusted their S$NEER rate to slightly raise the rate of appreciation. Some move had been expected but this took the market by surprise as it was not a scheduled rate meeting. USDSGD now 1.3435 which has been an area of support since Sept 2021.

Finally, I see that UK is changing its Covid travel rules. From 11th Feb covid tests will no longer be required for the fully vaccinated. There will still be a form to fill in, but with a load of hassle taking away from travellers I wouldn’t be surprised if bookings accelerate, offering a much needed boost to the travel industry.

- 09.00 German IFO

- 15.00 US consumer confidence

- 21.45 NZ trade balance

- 23.50 BoJ summary of opinions