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German factory orders increased 1.8% for January after a 3.0% increase the previous month and above expectations of 1.0%. The Euro-zone Sentix investor confidence index retreated sharply to a 16-month low of -7.0 for March from 16.6 previously and below expectations of 5.3 as the Ukraine conflict sapped confidence.

The economic data releases had little overall impact with markets focussing on fears over the regional outlook as the potential for economic damage from the Ukraine conflict intensified. In particular, there were fears over the impact of a surge in energy prices.

During Monday, markets focussed on the potential for fresh energy sanctions against Russia and the potential ban on imports from Russia. Euro-zone countries, especially Germany and Italy remain very dependent on Russian gas and any ban would, therefore, have a very serious impact on the economy.

The Euro rallied during the European session amid reports that EU officials were not prepared to ban Russian energy exports outright with a dip in energy prices triggering highs around 1.0925 against the dollar amid limited short covering.

Underlying confidence remained very fragile with renewed Euro selling after the New York open as the dollar continued to attract defensive support.

There were expectations that Europe would look to phase out Russian energy imports with the Euro around 1.0870 at the European close. There were also reports late on Monday that the EU will announce a plan on Tuesday to reduce Russian gas imports by over 60% in 12 months while the US may act alone to ban Russian oil imports. Overall volatility eased slightly on Tuesday, but Euro sentiment remained vulnerable with the Euro retreating to near 1.0850 against the US dollar.




The US employment trends index strengthened to 119.2 for February from a revised 118.2 the previous month and the strongest reading for over four years.

US Treasuries dipped at the New York open with a rally in equities helping to limit support for bonds. As US yields moved higher, the dollar gained an element of support, although there was still a notable reluctance to sell the yen given underlying Ukraine tensions and risk vulnerability.

The Federal Reserve is in a blackout period ahead of next week’s policy decision with risk trends tending to dominate. The dollar was able to secure a net advance to around 115.40 at the European close despite the renewed slide in equities.

Asian equities remained vulnerable on Tuesday with further concerns over the impact of surging energy prices. There were expectations that the Bank of Japan would curb upward pressure on bond yields and the dollar was able to consolidate just below 115.50 against the dollar with the Euro around 125.30.




Halifax reported a 0.8% increase in house prices for February, below expectations of 0.8%, although the year-on-year increase at 10.8% from 9.7%. UK data releases had little impact with markets focussed firmly on risk conditions and Ukraine developments.

After dipping to lows below 1.3150, Sterling attempted to rally against the dollar as equities rallied and energy prices retreated. Risk appetite dipped again after the New York open which triggered fresh  selling pressure on the UK currency and fresh lows below 1.3120.

There were fresh concerns over the UK economic outlook, especially with further damage from the surge in energy prices. The Euro staged a significant recovery from 5-year lows near 0.8200 to trade around 0.8290 as volatility in the pair remained high.

BRC data reported a like-for-like retail sales increase of 2.7% in the year to February and below expectations of 4.7% with unease over the impact of surging energy prices on discretionary spending. Sterling dipped to fresh 16-month lows below 1.31 against the dollar in early Europe on Tuesday with the Euro around 0.8280.




Swiss sight deposits increased CHF0.5bn in the latest week to CHF725.7bn which suggested that the National Bank had engaged in limited intervention to curb franc gains. On Monday, the central bank also intervened verbally with a warning that it would be active in currency markets to curb franc gains, although it noted that it would concentrate on the overall currency situation rather than specific currency pairs.

The franc dipped lower following the comments with the Euro recovering to highs near 1.01 before fading again while the dollar secured a net advance to 0.9260.

There was still an important reluctance to sell the franc given very vulnerable risk conditions with the Euro around 1.0060 on Tuesday.


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