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In a live address Putin said there is no immediate need to invade/annex Eastern Ukraine and this saw markets significantly downgrade the threat. It’s also refreshing to see Putin acknowledge the devastating impact Russia’s actions had on financial markets. With that in mind risk rallied in European trade, reversing most of the losses from the previous session.
The reversal extended into US trade, with USD/JPY leading the way. USD/JPY have been the two key trades I’ve been eyeing over the past 24 hours as they tend to react first to any major changes in sentiment. USD/JPY is now at 102.24, which is essentially back where it was on Friday before the situation escalated. With Russia calming, focus now shifts to US economic data which is set to ramp up heading into the end of the week. Later today we have ADP non-farm employment change which is expected to show 159,000 jobs added. We also have the ISM non-manufacturing PMI reading due out and the Beige Book, while Fed member Fisher is set to speak.
Fed speak continues with Dudley and Plosser on the wires on Thursday along with unemployment claims data. Friday will be the big one with the official non-farm payrolls reading due out. Any signs that the US economy has come out of the wintery conditions slump would be supportive of the USD.
AUD focussing on GDP data
Meanwhile AUD/USD is going through a confusing time. While risk sentiment has improved, AUD/USD remains subdued following the RBA’s statement yesterday. The pair is currently sidelined at 0.895 with the 0.89 support managing to hold all week. Yesterday the AUD was underpinned by a strong set of building approvals numbers showing solid growth in detached housing and apartments, up 34.6% year-on-year. Current account data continues to show a solid contribution from exports probably as a result of a weaker AUD. There were only minor changes to the statement with the RBA acknowledging declining resource sector investment. The RBA also put in a line on the AUD being higher than the historical standard and some feel this is a first step towards an easing bias again.
Today we have 4Q GDP numbers which are expected to be up 2.5%, but some analysts feel a weak domestic market might nullify a solid contribution from net exports. Meanwhile China’s National People’s Congress commences and a possible widening of the yuan trading band, deepening reforms and economic targets will be the key focus.