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Markets Reverse Risk-Off Poise as Russian Troops Demobilize

FOREX
  • Markets are reversing the risk-off posture seen since the beginning of the week, with signs that Russia are pulling back troops from both the eastern and southern Ukrainian borders the latest catalyst for a risk-on rally. As a result, the currencies that were hardest hit yesterday (namely SEK, AUD and EUR) are among the strongest performers so far.
  • Equities have rallied sharply, with US futures pointing to a solidly positive open of 1.5-2.0% later today. Markets clearly have some way to go before retracing the Russia-inspired sell-off, with EUR/JPY still much closer to recent lows relative to recent highs. 131.39 marks first resistance for the cross ahead of 131.60 and the 132 handle.
  • UK jobs data came in largely inline with expectations, leaving little reason for the MPC to change tack on their current tightening path. Sell side consensus continues to shift toward a protracted tightening cycle in the UK, with both HSBC and Goldman Sachs steepening their BoE rate path assumptions in the past few days.
  • Focus turns to the US PPI release for January, with markets expecting headline final demand PPI to moderate to 9.1% from 9.7% on a Y/Y basis. There are few central speakers of note, with just ECB's Villeroy on the docket.
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