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Havens Rally Amid Mixed Messages in Eastern Ukraine

FOREX
  • Haven currencies are on the front foot Thursday, with JPY and CHF outperforming all others. Markets have adopted a risk-off poise amid mixed messages emerging from eastern Ukraine - with early reports of shelling in separatist regions unsettling traders. Reports of the activity circulated in late Asia-Pac hours, prompting a sharp tick lower in EUR/JPY, which slipped around 100 pips and remains weak at the NY crossover.
  • The reports are less than clear-cut, however, with shelling and the exchange of fire along the line of control in the Donbas a frequent occurrence and not necessarily an indication of Russian incursion. However, the tense situation in the region has understandably made each headline a potential signal of imminent conflict. As a result, front-end vols are inching higher, while 1m contracts also add a Fed-premium as they begin to capture the March FOMC rate decision.
  • Antipodean currencies have swiftly recouped some of the earlier risk-off selling pressure, with a solid set of jobs numbers from Australia adding a tailwind. Employment change figures came in well ahead of expectations, with a rising participation rate, helping AUD/USD hold close to the top end of the recent range. The 0.7245 100-dma marks the next key resistance line.
  • US weekly jobless claims numbers are the data highlight Thursday, but markets may also pay some heed to building permits and housing starts numbers for January. The speaker slate could be of more interest, with MNI hosting a webinar with ECB's Lane (Sign up link here: https://www.eventbrite.co.uk/e/philip-r-lane-executive-board-member-and-chief-economist-at-the-ecb-tickets-241129283177 ) as well as scheduled appearances from Fed's Bullard and Mester - both of which speak on the policy outlook.
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