The moment has passed
On Monday, before Russia made its latest move into Ukraine, there was guarded optimism that the situation could be resolved diplomatically. Even the Russian rouble had looked perky. That moment has now passed. The RUB is almost 5% lower on the day, oil is up by 4%, and share prices around the world have fallen.
It has meant a return to fashion for the safe-haven CHF and JPY, which took the first two podium positions with average gains of 0.6% and 0.4%. The USD came third, adding a fifth of a cent against the GBP. The Northern Scandinavian crowns came out of it worst, with the SEK at the back of the field for the third day out of four.
The EUR was also well off the pace, down by an average of 0.3% and two fifths of a cent lower against sterling. Broadly, it looked as though investors’ appetite for European currencies was inversely proportional to their proximity to Russian troops. Sterling was on average unchanged.
Not forgetting the ecostats
The main statistical focus on Monday was the provisional purchasing managers’ indices from Markit. Except for the fairly dismal numbers from Japan, the readings mostly exceeded expectations.
The UK figures beat forecast, with manufacturing unchanged on the month at 57.3 and services at an eight-month high of 60.8. In Britain, as in many other countries, the relaxation of Covid restrictions made life easier for face-to-face service providers. That was the case in the Eurozone, where manufacturing fell slightly to 58.4 and services jumped nearly five points to 55.8, a three-month high. There were no data from North America, where the United States and Canada both had public holidays.
There was little else to be had from the statistics other than NZ credit card spending, which increased by 5.5% in the year to January. The Bundesbank’s monthly report was typically technical, staying well away from monetary policy forecasts.
Watching the RBNZ
America plays catch-up today, delivering the provisional PMIs that failed to appear on Monday. The main scheduled event comes tonight when the Reserve Bank of New Zealand is likely to deliver another rate hike. Further Russian action in Ukraine is imponderable.
Britain set the ball rolling with the public sector borrowing figures for January. For the first time since the beginning of the pandemic, taxation and other revenues exceeded spending. The surplus was nevertheless lower than expected because of higher interest payments and the costly Covid test and trace programme. European data this morning relate to Italian inflation and German business confidence. After lunch, the US figures cover consumer confidence, house prices and the delayed provisional PMIs.
Very early tomorrow, the Reserve Bank of New Zealand is expected to raise its Official Cash Rate benchmark by 25 basis points from 0.75% to 1%. The move has been widely telegraphed, and it would be a surprise if the RBNZ were to do nothing.