Markets remain cautious on Thursday as investors struggle to figure out whether or not there will be a military conflict between Russia and Ukraine. US Treasury bond yields are pushing lower, the US Dollar Index is edging higher and US stocks futures are falling between 0.3% and 0.5%. Later in the day, the US economic docket will feature the weekly Initial Jobless Claims and Housing Starts data but the market action is likely to continue to be driven by geopolitical headlines.
During the Asian trading hours, Sputnik News reported Ukraine has fired mortar shells and grenades on four Luhansk People’s Republic (LPR) locations, triggering a fresh bout of flight to safety. Ukraine has already denied this claim.
Meanwhile, Mikk Marran, director-general of the Estonian Foreign Intelligence Service, said on Thursday they were witnessing Russian military units moving toward the Ukrainian border. On a similar note, US Secretary of State Antony Blinken told MSNBC that they have not yet seen any pullback of Russian forces. On a positive note, the Russian defence ministry announced that 10 military convoys have left Crimea after military drills but this headline doesn’t seem to be helping the market mood improve.
Late Wednesday, the US Federal Reserve released the minutes of its January policy meeting. The publication showed that most participants were in favour of removing accommodation at a faster pace than currently anticipated if inflation does not move down as they expect.
EUR/USD climbed toward 1.1400 on Wednesday but ended up closing the day around 1.1370. After falling toward 1.1300 on risk-aversion early Thursday, the pair has managed to rebound to the 1.1350 area.
GBP/USD stays under modest bearish pressure in the European morning and trades below 1.3600. Russia said on Wednesday that they will retaliate in case the UK were to impose new sanctions against Moscow over the conflict with Ukraine.
USD/JPY is edging lower and trading below 115.50 with the JPY finding demand as a safe haven. Earlier in the day, the data from Japan showed that Machinery Orders increased by 3.6% on a monthly basis in December, surpassing the market expectation for a decrease of 1.8% by a wide margin.
Gold continues to react sharply to changes in risk sentiment. After falling below $1,850, XAU/USD gained traction and closed decisively higher near $1,870 on Thursday. The pair continues to push higher toward $1,880 early Thursday.
Bitcoin registered modest losses on Wednesday and trades in a tight range near $44,000 in the European morning. Ethereum is having a hard time staging a recovery and closes in on $3,000 after closing in the red on Wednesday.