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German consumer confidence retreated to -8.1 for February from -6.7 previously and below expectations of -6.3 with sentiment sapped by the high level of energy prices. Headline Euro-zone CPI inflation was confirmed at a record high of 5.1% for January with the core rate at 2.3%.

ECB council member Vasle stated that the time seems right for policy to start the process of gradual normalisation. The Euro briefly traded above 1.1350 against the dollar but was unable to make significant progress. Vice president de Guindos stated that the bank will adjust asset purchases if needed and then see about rate hikes.

Ukraine's fears increased again after the New York open following a warning from the US that a full-scale Russian invasion of Ukraine was likely within 48 hours.

Ukraine also announced a state of emergency would come into force for at least 30 days. There were also reports of cyberattacks on Ukraine facilities and risk appetite gradually deteriorated. The Euro also lost ground and drifted towards the 1.1300 level after the European close.

Overnight, Russian President Putin stated that Russia has announced a Special Military Operation in the Donbas region. There were also reports of military forces entering Ukraine from several points including Belarus. There was also evidence of attacks on military airfields throughout Ukraine including one near Kiev as Russia looked to downgrade a potential Ukraine military response. Risk appetite dipped sharply on the reports and the Euro slumped to 3-week lows near 1.1200 before a tentative recovery to 1.1250 as commodity currencies retreated sharply. Choppy trading will inevitably be a key feature during the day.




US Treasuries briefly lost ground just after the New York open, but there was fresh buying on dips as risk appetite dipped again and US equity indices moved lower. The dollar was able to hold above the 115.00 level, but struggled to make any significant headway.

As equities continued to edge lower, the dollar tested the 115.00 support area.

San Francisco Fed President Daly stated there was the need for more urgency on moving rates higher and likes a 0.25% move in March. She added that there may need to be more than four rate hikes this year. The rhetoric dampened expectations of a 0.50% rate hike at next month’s meeting.

Risk appetite dipped sharply following the reports of a Russian attack on Ukraine with US futures sharply lower. There was also increased demand for Treasuries and the 10-year yield dipped below 1.90%. Defensive yen demand also increased and the dollar dipped to 3-week lows near 114.50 with the Euro below 129.00.

The Russian move was criticised very strongly by Western leaders and the response through sanctions and any other measures will be watched closely.




Bank of England Governor Bailey stated that second-round effects very clearly pose a risk to inflation and he also looked to defend previous remarks that those with the least bargaining power would lose out. Bailey, however, also stated that markets should not get carried away about the likely scale of interest rate increases.

MPC member Haskel stated that there could be upside risks to the inflation forecast from geopolitical risks. He also warned that high levels of inflation might lead to more sustained upward pressure on nominal wages than embedded in the central projection.

Fellow MPC member Tenreyro commented that the inflation pick-up was likely to be larger and more persistent than expected previously and further modest tightening would be consistent with inflation returning to target sustainably. Overall, however, she downplayed the potential scope for interest rate increases.

The rhetoric overall cast further doubt on elevated market expectations surrounding interest rates and Sterling tended to drift lower.

The currency was unable to hold above 1.3600 against the dollar, especially as equities moved lower while the Euro was able to post a limited net advance.

Risk aversion on Ukraine news triggered a Sterling slide to just below 1.3500 against the dollar on Thursday with a net Euro retreat to around 0.8335.




The Credit Suisse ZEW economic expectations index edged lower to 9.0 for February from 9.5 previously. The Swiss franc attracted fresh support during the day as Ukraine concerns increased again. The Euro retreated sharply to near 1.0380 while the dollar also posted net losses to 0.9180.

Risk appetite slumped again on Thursday following the reports of a Russian attack on Ukraine with the Euro sliding to lows below 1.0300 before a slight recovery while the dollar was unable to make headway and was trapped below 0.9200 and traded around 0.9180.

Technical Levels 

Today's Calendar 



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