Risk sentiment has shown some volatility early to start the week.
Overview
Earlier, the U.S. dollar experienced gains as equities fell amid intensifying tensions on the Russian/Ukrainian border. Stock futures have pared their declines, however, after Russian Foreign Minister Sergei Lavrov told President Vladimir Putin he supports continuing diplomatic efforts.
The price action this morning highlights what analysts have been arguing: this is likely a pivotal week in the standoff. The U.S. has warned an invasion of Ukraine may be imminent while Russia has accused the U.S. of stoking “hysteria.” Geopolitical risks will remain at the forefront this week.
There is no major economic data on the docket today but producer price data due out tomorrow will be closely watched after a report last week showed consumer inflation rose to the highest level in four decades. St. Louis Fed President James Bullard is speaking this morning on CNBC. The minutes from the last FOMC meeting will be released on Wednesday afternoon.
What to Watch Today…
- ECB President Christine Lagarde speaks at 9:15 a.m.
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EUR
The Euro retreated against the U.S. dollar to start the week as all eyes remain on the situation with Russia and Ukraine. However, the euro benefited from the comments from Sergei Lavrov which allowed equities to rise. EUR/USD is now only down 0.1% from Friday’s close.
Later this morning, European Central Bank President Christine Lagarde is set to speak. Her comments come after a few dovish comments made by ECB members over the weekend. Olli Rehn said any overreaction to short-term inflation might stymie growth and Gabriel Makhlouf said it was “unrealistic” to think the ECB might hike rates in June.
CAD
The Canadian dollar traded weaker overnight but has rebounded a touch in early trading. The price of oil is retreating in the hopes tension on the Ukrainian will be dialed down. We are not holding our breath. WTI fell half a percent but remains at elevated levels. Today’s price drop is the first fall in four sessions.
A measure of Canadian consumer confidence is due out this morning but is unlikely to have a material effect on the loonie.
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