Cautious Mood Takes Hold As Diplomatic Efforts Fail To Allay Geopolitical Risk

Antipodean currencies led losses in G10 FX space as weekend headline flow failed to alleviate jitters related to the Russo-Ukrainian standoff. Intensified diplomatic activity continued, albeit to no avail so far, with all parties sticking to familiar narratives. While the continuation of broader diplomatic push to defuse the crisis may have proved reassuring at the margin, participants were unwilling to take more risk when faced by the prospect of a potential escalation.

• Weak PSI data for January amplified pressure to the kiwi dollar by showing that New Zealand's services sector has plunged deeper into contraction, with all sub-indices registering losses. Meanwhile, the number of new community cases of Covid-19 reached a record high as the new week got underway.
• The greenback and Swiss franc gained on the back of better appetite for safer currencies, but the yen struggled to jump onto that bandwagon. Its underperformance relative to safe haven peers came as Japan returned from a long weekend to witness BoJ JGB purchase operation intended to cap the recent rise in yields.
• CAD topped the G10 pile as crude oil prices hit fresh cycle highs at the start to the week, underpinned by the unfolding Russo-Ukrainian crisis.
• The Russian rouble extended losses as onshore Moscow markets re-opened, following its most aggressive sell-off since the onset of the Covid-19 pandemic last Friday.
• In the absence of notable data releases today, focus turns to comments from Fed's Bullard & ECB's Lagarde.