Risk-off as tensions between Russia and Ukraine intensify

Daily Currency Update

US treasury yields fell back again yesterday, but so too did equity markets, this time as investors turned even more risk-averse.  The prospect of less US Federal Reserve stimulus this year and rising tensions between Russia and Ukraine meant for a run on riskier assets and currencies including the likes of AUD, NZD, NOK and SEK.  Traditional safe-haven currencies such as the Yen and US dollar have been bid higher as US President Biden also warned that Russia would pay a heavy price if its forces moved across the border.

In other news, January Philadelphia Fed manufacturing printed better than expected yesterday at 23.2 vs. 20.0 expected, a contrast to New York manufacturing data released earlier in the week, which came in below market expectations.  And in more recent news, UK Retail Sales printed much weaker than market forecasts this morning, a big miss but one that can be partly explained away by Omicron, and it’s unlikely to prevent the Bank of England from holding back on tightening monetary policy.  On that note, investors are increasingly pricing in the chance of a UK central bank rate hike to 0.5% on February 3^rd.