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Sentiment Stabilises as Likelihood Points to Errant Ukrainian Missile

FOREX
  • Following the late knock to risk sentiment on Tuesday following reports of a missile strike crossing the Ukrainian border into Poland, the market fallout looks more contained Wednesday. The USD is resuming the weakening trend and the JPY giving back the entirety of the Tuesday rally. Similarly, the 2% rally in EUR/PLN has been erased to put prices on a much more stable footing. The stabilisation of markets follows firm intelligence reports that the errant missile strike was Ukrainian in origin, rather than Russian, leaving the triggering of NATO's collective defence far less likely after an emergency meeting this morning.
  • Nonetheless, the sharp moves continue to underpin the fractious nature of markets at present, with front-end implied vols generally higher across G10.
  • UK inflation data left little lasting mark on GBP, with higher-than-expected CPI countered by a much more moderate core inflation reading. This keeps focus on tomorrow's Autumn Statement, at which the government are expected to outline a tighter, more fiscally-focused grip on government finances.
  • USD and JPY are the weakest in G10 on an intraday basis, while NOK and EUR are trading more favourably.
  • Focus turns to the October US retail sales release, seen rising 1.0% on the month and 0.2% ex-auto and gas. Central bank speakers due Wednesday include ECB's Villeroy, Panetta and Lagarde, as well as Fed's Williams, Barr and Waller.
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