Talk Of Potential Russia Oil Embargo Rattles Markets

The commodity complex received a considerable boost as U.S. chief diplomat Blinken flagged ongoing talks with European allies on a potential embargo on Russian oil, despite reports of U.S.-led diplomatic efforts to court alternative suppliers. The surge in crude oil prices has given rise to broader stagflationary concerns, leaving risk appetite in tatters.

• G10 FX space has been 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 mulling the impact of soaring commodity prices.
• Regional contagion risk has pulled the rug from beneath Nordic currencies, with NOK finding little consolation in firmer oil prices. The euro has tumbled in concert with them, with EUR/CHF falling below parity for the first time since 2015.
• 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. On the other hand, a spike in commodity prices have generated a headwind for the yen.
• The greenback (as measured by the DXY index) has extended its recent gains, printing best levels since mid-2020 as the new week got underway.
• The Russian rouble was indicated sharply lower, hitting a fresh all-time trough. Rapid erosion in Russia's creditworthiness has amplified pressure from potential oil embargo, as Moody's cut the nation's credit rating to Ca from B3, with negative outlook.
• Chinese trade data, German factory orders & retail sales, Norwegian industrial output as well as comments from BoE Dep Gov Cunliffe take focus from here.