Cable edges high amid risk- on mood

  • Pound climbed against the greenback with investors showing shaky optimism towards diplomatic solution on the Ukraine crisis.
  • Russian oil for imports severely impacted the sterling.
  • Investors keep an eye in the US Consumer Price Index (CPI) numbers, which is due later today.

 

Cable is trading high cheering the much-awaited compromise between the Kremlin and Kyiv. Ukraine has agreed to the stipulations of Moscow and is ready for a diplomatic solution to halt the deaths and destruction in Ukraine. This has build confidence in investors and they are turning towards the risk perceived assets like pound.

In a interview on Tuesday, Ukrainian President Volodymyr Zelensky again called on Russian President Vladimir Putin for dialogue, stressing that Ukraine is ready to talk and seek compromises, but is not ready to capitulate.

“First of all, I’m ready for a dialogue, but we’re not ready for surrender,” Zelensky said when asked whether Ukraine is ready to comply with the demands of the Russian Federation for a ceasefire: to change the Constitution and refuse to join NATO, recognize Crimea as Russian, recognize the independence of the so-called LPR/DPR.

He added “Because it’s not about me, it’s about the people who elected me. Regarding NATO, I lost interest in this issue after we realized that NATO is not ready to accept Ukraine. The alliance is afraid of contradictory things and confrontation with the Russian Federation.” A meeting between the two countries will, reportedly, be on Thursday in Turkey.

Meanwhile, The Pound was severely impacted  by the the prohibition of Russian oil for imports. The US had levied a ban on Russian oil on the US ports. And the British is determined to discontinue the imports of Russian oil by the end of 2022.

US will not be effected with the ban of Russian oil as it produces oil itself and does not bank heavily on imports from Russia. However, a nation like the UK, which heavily depends upon oil imports from Russia will face major turmoil in shuffling the suppliers going forward.

However, risk appetite has returned to the market with investors having shaky optimism about a diplomatic solution to the conflict.

Apart from the Russia- Ukraine meeting, The other main event due today is U.S. inflation data, The US CPI is likely to land at 7.6%, higher than the prior figure of 7.5%.

GBP/USD 4 Hour Chart:

Support: 1.3116 (S1), 1.3051 (S2), 1.3015 (S3).

Resistance: 1.3217 (R1), 1.3254 (R2), 1.3318 (R3).

Pound trades high with market cheering the compromise between the Kremlin and Kyiv. We expect a bullish trend for GBP/USD.

Hopes of cease-fire between Russia- Ukraine helps Euro

  • Euro trades higher with hopes of dialogue as Ukraine retreats from NATO membership and ready to compromise.
  • Investors were also hesitant to sell the euro ahead of a European Central Bank policy meeting on Thursday.
  • Upbeat prints of German Industrial Production (IP) for January favors the Euro bulls, However Ukraine- Russia crisis eyed.

 

Euro climbs higher against the greenback as market hope for a breakthrough in the dialogue between Russia and Ukraine. It is also partly lifted by expectations that the euro zone will increase fiscal spending to help offset the economic effects of Russia’s invasion of Ukraine. However, Thursday’s key meeting in Ankara and fears of stagflation undermines the pair EUR/USD.

An interview between Ukraine’s president and ABC News from Monday night is being reported on in New York trade by The Associated Press. The article highlighted the point that Ukraine was not on the verge of becoming a NATO member and the markets are interpreting Volodymyr Zelensky’s comments as withdrawal from applying for NATO membership.

But countries need to meet certain political, economic, and military goals to join the NATO. Ukraine was not formally ready to join NATO. There are a lot of criteria for NATO membership and Ukraine does not really meet any of those.

Now, President Volodymyr Zelensky has confirmed that he is no longer pressing for NATO membership in Ukraine. Moreover, Zelensky said he is open to “compromise” on the status of two breakaway pro-Russian territories that President Vladimir Putin recognized as independent just before unleashing the invasion on February 24. Thus, Investors are expecting  that there can be dialogue soon and a cease-fire that could lead to an easing on sanctions that will ultimately avert an even more bloody global war.

Meanwhile, Investors were also hesitant to sell the euro ahead of a European Central Bank policy meeting on Thursday. The prospect of stagflation has prompted economists to suggest policymakers might delay rate hikes until late in the year.

Bloomberg News reported on Tuesday that “European Union plans as soon as this week to jointly issue bonds on a potentially massive scale to finance energy and defense spending.”

On the data front, Upbeat prints of German Industrial Production (IP) for January and GDP quarterly report favored EUR/USD bulls. German IP marked the strongest monthly growth since 2020 with a 2.7% mark. The data published by Eurostat showed on Tuesday that seasonally adjusted Gross Domestic Product (GDP) in the euro area expanded by 0.3% on a quarterly basis in the fourth quarter. This print came in line with the initial estimate and the market expectation. Compared with the same quarter of the previous year, GDP grew by 4.6%. Moreover, An increase in Eurozone’s Employment Change YoY for Q4, to 2.2% versus 2.1% expected and prior also favored the EUR/USD bulls.

However, analysts said the euro is unlikely to rise much while there is so much worry about the war in Ukraine spreading. Fighting has not abated.

EUR/USD 4 Hour Chart:

Support: 1.0844 (S1), 1.0791 (S2), 1.0734 (S3).

Resistance: 1.0953 (R1), 1.1010 (R2), 1.1063 (R3).

The upbeat data and hopes of breakthrough in the dialogue between Russia and Ukraine favors the Euro bulls. We expect a bullish trend for EUR/USD.

Australian dollar slips amid strong dollar

  • The antipodean has slipped on a pullback in commodity prices as investors paused to reassess the Russia-Ukraine conflict.
  • Russia warns Western countries could face oil prices of over $300 per barrel, cuts to EU gas supply, weighs on the market sentiment.
  • Australia’s NAB Business Confidence improved in February.

 

Australian dollar dips following the footprint of commodity prices as investors paused to reassess the Russia-Ukraine conflict after talks hardly advanced, with a strong U.S. dollar.

The dollar index held close to a 21-month peak hit on Monday, following news of a potential U.S. oil import ban on Russia.

Meanwhile, Russia warned that oil prices could surge to $300 a barrel and it might close the main gas pipeline to Germany if the West halts oil imports over the invasion of Ukraine as peace talks made little progress.

As a aid, The World Bank has approved $723 million in loans and grants for Ukraine to be transferred in the next few days. U.S. congressional negotiators neared a deal to provide Ukraine billions of dollars in emergency aid. The White House requested $10 billion.

Peace talks made very little progress. Negotiators make little progress Russian negotiators said they did not have positive developments to report following talks with Ukraine and warned not to expect the next round to bring a final result. Vladimir Medinsky said The talks “are not easy.”

Ukraine’s negotiator Mykhailo Podolyak said some small progress had been made on agreeing logistics for the evacuation of civilians, but no agreement was reached that significantly improves the broader situation.

Russia said, A fourth round will take place very soon. The Russian and Ukrainian foreign ministers are expected to meet in Turkey on Thursday.

On the other hand, upbeat Business confidence offered some strength to Aussie. Reuters said “Tuesday’s survey from National Australia Bank (NAB) showed its index of business conditions rose 7 points to +9 in February, reversing all of January’s drop. The index of confidence climbed 9 points to +13, well above December’s low of -12.”

Besides Russia-Ukraine headlines, Market will watch speech from the Reserve Bank of Australia (RBA) Governor Philip Lowe which is due on Tuesday. This may dictate the likely interest rate decision by the RBA in the coming monetary policy meeting. That said, comments from the highest chair of central banks bring uncertainty for the associated currency ahead of the event.

AUD/USD 4 Hour Chart:

Support: 0.7268 (S1), 0.7225 (S2), 0.7139 (S3).

Resistance: 0.7398 (R1), 0.7484 (R2), 0.7528 (R3).

Following the footprint of commodity prices, Australian dollar trades low ahead of RBA Lowe speech. We expect a bearish trend for AUD/USD.

Gold price crosses $2000 on Ukraine crisis

  • The yellow metal remains on the front foot as traders seek risk-safety amid the ongoing Russia-Ukraine woes.
  • US House Speaker Nancy Pelosi explores legislation that would ban Russian oil imports, weighs on the market sentiment.
  • Upbeat Employment data favors the Fed hawks and raises the rate hike expectation.

 

Gold prices has scaled the $2000 level on Monday, the highest level since last one and a half year as Market flocked towards the safety of the metal due to escalating Russia-Ukraine crisis.

Russia is continuing in the bombardment of Ukraine. The UK Times reports that Russian forces In Ukraine are decimated, but this raises the risks of intensified attacks as Vladimir Putin ups the ante. Ukraine fears larger scale airstrikes and heavier artillery.

Meanwhile, Ukraine’s president, Volodymyr Oleksandrovych Zelenskyy, has pleaded for a no-fly zone over his country and lashed out at NATO for refusing to impose one, warning that “all the people who die from this day forward will also die because of you.”

However, NATO has no intention for the risk of escalating the war across Europe. Russian President Vladimir Putin warned over the weekend that his country would consider any third-party declaration of a no-fly zone over Ukraine as participation in the war there.  He said “Russia would view any move in this direction” as an intervention that “will pose a threat to our service members.” “That very second, we will view them as participants of the military conflict, and it would not matter what members they are,” the Russian president said.

Moreover, Wall Street Journal reported that ”Syrians may be sent to fight in Ukraine Russia recruiting Syrians who can fight in urban warfare to send them to Ukraine, WSJ has reported citing four US officials. The US officials did not specify the number of Syrian mercenaries were planned to be sent.”

Amidst the escalating war weighing the market sentiment, The recent news that US House Speaker Nancy Pelosi is exploring legislation that would ban Russian oil imports , further intensifies the sentiment.

Pelosi said last Thursday that she supports banning Russian oil imports to the US. Biden has been reluctant to curb Russian oil shipments to the US or slap on energy sanctions with prices already hitting the pockets of US citizens. However, the sanction has already been backed by wide numbers of Republicans and an increasing number of Democrats. A bill to ban oil and energy imports from Russia would terminate normal trade relations with Russia and Belarus and cancel Moscow’s access to the WTO.

The risk aversion market sentiment favors the gold. However, the upbeat Employment data of US favor the faster Fed rate hikes, in turn boosting the US dollar. US Nonfarm Payrolls (NFP) rose by 678K, more than the median forecast of a 413K figure and upwardly revised 481K prior during February. On the same line, the Unemployment Rate dropped to 3.8% versus 4.0% previous readings and 3.9% expected during the aforementioned month.

After the release, As per Reuters, Chicago Fed President and FOMC member Charles Evans mentioned, “The US central bank is on track to raising rates this year, though it may be ‘more than I think is essential to do so at every policy-setting meeting.”

XAU/USD 4 Hour Chart:

Support: 1942.8 (S1), 1915.5 (S2), 1901.6 (S3).

Resistance: 1984.1 (R1), 1998.0 (R2), 2025.3 (R3).

The escalating Russia-Ukraine tension favors the yellow metal; we expect a bullish trend for XAU/USD.