Prospect Of Russia Oil Embargo Rattles Markets, War Drumbeat Frightens Europe

Crude oil prices surged after U.S. chief diplomat Blinken said that the White House is in talks with European allies over a proposal to ban Russian oil imports, with later reports flagging potential for unilateral action by the Biden administration. Soaring oil prices inspired stagflationary angst, despite reports of U.S.-led diplomatic efforts to court alternative suppliers. The implications of a firmer commodity complex were weighed against lingering worry about Russia's unfolding incursion into the Ukrainian territory, which discouraged participants from taking risk.

• G10 FX space was effectively split into two halves, with Europe spooked by the potential aggravation of military/humanitarian fallout from the Russo-Ukrainian war and the rest of the world prioritising the impact of soaring commodity prices.
• Nordic FX currencies went offered alongside the Eurozone's single currency on the back of regional contagion risk, with NOK struggling to find consolation in firmer oil prices. EUR/USD hit its worst levels since mid-2020, while EUR/CHF probed the water below parity for the first time since 2015, the immediate aftermath of the abrupt removal of the franc's peg to the euro. Despite a sharp sell-off in EUR/CHF, Russia jitters have spread into Swiss franc, which underperforms all of its major peers from outside of continental Europe.
• Commodity market dynamics have taken precedence in the Asia-Pacific, inspiring notable rallies in Antipodean currencies while generating some headwinds for the yen. AUD/USD crossed above the $0.7400 figure and NZD/USD punched through the $0.6900 mark. The Aussie dollar printed its best levels against the euro since mid-2017.
• The greenback (as measured by the DXY index) extended its recent gains and printed best levels since mid-2020 before easing off. Only the commodity-tied trio of AUD, NZD & CAD fared better than the U.S. dollar.
• The Russian rouble crumbled in offshore trade, falling to a new historic low. Rapid erosion in Russia's creditworthiness amplified pressure from the potential oil embargo, as Moody's cut the nation's credit rating to Ca from B3, with negative outlook.
• German factory orders & retail sales, Norwegian industrial output & comments from BoE Dep Gov Cunliffe take focus from here.