Safe-haven assets unwind on Russia

Risk came back to life on the back of a fairly dovish Janet Yellen and news that Russia is pulling back troops from the Ukraine border. 

Yellen said a high degree of accommodation is still needed because unemployment and inflation are still well short of the Fed’s goals. She also said there is no timetable for when rate increases will occur. While the comments appeared dovish at first, there was no material change in Janet Yellen’s language. Sentiment was improved, but the trend in the FX space was not very clear as most of the major FX space just held tight ranges. Many would have expected to see further falls in the greenback given the dovish Yellen comments. However, the market remains confident that tapering will remain on course and possibly this neutralised the impact on the greenback.

Australia jobs numbers in focus

AUD/USD remains in a tight range above 0.93 and will be in focus yet again today ahead of jobs numbers and China’s trade balance. Consensus is for 8800 jobs added and for the unemployment rate to tick up to 5.9%. China’s trade balance, due out at midday, is expected to show a $16.7 billion surplus, which is a solid bounce from the March’s reading of $7.7 billion. Exports are expected to be down 3% and imports lower by 2.1%. Any misses today could see AUD/USD back below 0.93 in a hurry. Tomorrow we have the RBA’s monetary policy statement so there is still plenty of volatility to come.

USD/JPY support holds

USD/JPY tested key support yesterday in the 101.50 region and managed to hold that level. Like I said yesterday, a break of that could have been pivotal and could have seen the pair extend losses to test the 100 mark. USD/JPY tested 102 and remains sidelined just shy of that level. Reduced Russia/Ukraine risk emanated from Putin’s comments regarding pulling troops away from the Ukraine border and suggesting Ukraine’s Donetsk and Luhansk regions should postpone 11 May referendums to help create the necessary conditions for a dialogue between Ukraine's government and separatists. This saw safe-haven demand decline, and result in weakness for the yen and gold. Once confirmation of Putin’s comments is confirmed by some action then we could possibly see the safe-haven trade unwind further.

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