Citi

European Open

Geopolitics took a backseat as risk sentiment remained calm post the European close. Headlines of US Secretary of State's Blinken stating the widely anticipated meeting with Russia’s Lavrov was cancelled did little to move markets. DXY, equities and oil remained somewhat flat post European close, with UST markets closed for a Japanese holiday. The highlight, rather was the RBNZ decision early in the Asian session, in which they hiked the OCR by 25bps to 1% and announced QT. NZD gained, as NZD 2y swap rate rose by 11bps. AUD wage price index printed in line with expectations. However, given the elevated expectations for the print, Aussie OIS markets were down a touch. THB saw some restrictions easing for foreign tourists, causing a swing higher in THB towards the Europe open.

Looking ahead, we will continue to keep a close eye on developments amid Russia-Ukraine tensions. GBP will see a slew of speakers today, starting with Bailey, Broadabent, Haskel and Tenreyro at 09:30 GMT, and Tenreyro once again at 17:00 GMT. Over on the EM front, we will see TWD IP at 08:00 GMT, BRL inflation at 12:00 GMT and ARS Economic activity at 19:00 GMT.

We flag that JPY and RUB are on holiday today.

–In FX, we remain positive on the G10 commodity exporters, notably AUD, as we think the commodity exposure and valuations outweigh their risk sensitivity. Geopolitical risks and higher oil prices suggest increasing the share of EUR in the funding mix for now.

Price action saw DXY grind higher yesterday. UST markets were closed in Asian trading due to a Japanese holiday. Equity markets were up a tad in Asian trading, following a rebound post the European close. Meanwhile, oil prices traded steadily after dipping in the European session yesterday. We note that Brent was trading close to the $100 handle yesterday during European hours.

Credit Agricole

Asia overnight

Having weighed up the sanctions western governments have levied on Russia, investors are feeling a little more relaxed about events in Ukraine. The sanctions so far are short of the worst that could have been used such as embargoes against Russian exports and denying Russian entities access to the USD payments system. Instead, the US has placed sanctions on Russia sovereign debt and Russian elites and Germany has halted the approval of Nord Stream two.

These sanctions could be ratchetted up, however. US Secretary of State Anthony Blinken has cancelled his meeting with Russian Foreign Minister Sergey Larov due for Thursday this week, as the US Administration believes Russia has begun invading Ukraine. The US has said it remains open to diplomacy, however, and it appears the lines have been drawn for negotiations between Russia and the West. Most Asian bourses as well as S&P500 futures were trading higher at the time of writing. Outside of the NZD, it was a quiet Asian session for G10 FX. A hawkish RBNZ led to the NZD outperforming during the session.