Western Sanctions Turn Rouble Into Rubble, Safe Havens Catch Bid

The rouble collapsed to historic lows in offshore trading after the West unleashed a barrage of sanctions aiming to isolate Russia from the global financial ecosystem. The decisions to disconnect selected Russian banks from the SWIFT network and restrict Russian central bank's access to its foreign reserves took their toll on RUB, with onshore trading set to reopen with a delay, at 10:00 local time. Anecdotal evidence from trading floors pointed to low turnover, with the rouble perceived as toxic, while press reports showed people queueing up to withdraw foreign currency deposits across various Russian cities. The CRB took measures to soothe the nerves and prevent capital flight, to little avail.

• Financial repercussions of Western sanctions were paralleled by a lingering threat of broader geopolitical escalation. President Putin raised the combat readiness level of Russian nuclear forces, while source reports suggested that Belarus might join the attack on Ukraine. Both steps were a bad omen for today's meeting between Russian and Ukrainian delegations, with Ukrainian President Zelensky sceptical about potential for any breakthrough.
• Contagion risk was a major driver of price action across G10 FX space, with Scandinavian currencies coming under pressure. The Eurozone's single currency went offered as the bloc took a more decisive posture in its response to Russian aggression against Ukraine. Safe haven currencies (USD, JPY, CHF) outperformed as fallout from the Russo-Ukrainian war sent participants looking for shelter.
• U.S. MNI Chicago PMI & flash wholesale inventories, Swedish GDP and comments from Fed's Bostic, ECB's Lagarde & Panetta will draw attention later in the day. That is, of course, in addition to headlines surrounding the Russo-Ukrainian war.