USD
The dollar weakened on Monday after major central bank selling to prop-up currencies most heavily hit by the Ukrainian crisis. It was reported the Russian central bank sold over 10bn dollars worth of gold and currency reserves after the rouble sank following an escalation in troubles in the region. Other emerging market central banks may have done the same as a general fall in risk appetite impacted on their currencies, with the Ukrainian Hryvnia falling over – 2.0%. The greenback had risen earlier on in trading after the release of Manufacturing ISM data, which showed an above-expectations rise to 53.2 versus 52.0 expected. Other data was also overall positive, with Personal Income and Personal Spending both rising by 0.3% and 0.4% respectively, which were both higher-than-expected. Construction Spending increased by 0.1% when a -1.0% fall had been expected and ISM Prices Paid fell to only 60.0 when a deeper fall to 57.4 had been expected. Early gains, however, were soon returned to the markets as dollar selling gained traction during the day.
EUR
The euro rose on Monday after Manufacturing PMI showed a greater-than-expected rise in February, which along with Friday’s unexpectedly high inflation figures, further added weight of evidence against an ECB rate cut, with their rate meeting scheduled for this Thursday. February Manufacturing PMI for the whole euro-zone came out at 53.2 when it had been expected to remain unchanged at 53.0. In Germany it rose to 54.8 from 54.7, and in France it increased to 49.7 from 48.5. Italy was the only country where it didn’t rise, coming out at 52.3 from a revised down 53.1 previously. Other data showed Italian GDP coming out at -1.9% in 2013, as expected, and the ratio of deficit to GDP remaining unchanged at 3.0%.
GBP
The pound inexplicably weakened on Monday despite the release of better-than-expected data. A general fall in risk appetite, as a result of growing tensions in Ukraine, however may have provided the explanation. Manufacturing PMI in February rose above analyst’s estimates to 56.9 versus the 56.8 expected. Mortgage Approvals in Jan increased to 76.9k versus the 74.5k expected. Money Supply Fell to -0.3% y/y in Jan for M4 when a 0.7% rise had been anticipated; m/m it rose by a muted 0.3% versus the 1.4% expected. M4 Ex IOFCs 3m Annualised rose by 1.6% versus the 4.1% expected. The next important event for sterling is the BOE rate meeting on Thursday, although it is not expected to yield any significant changes.
JPY
The yen rose on Monday after increasing geopolitical tensions in the Ukraine led to a rise in safety flows. The rise in risk aversion was intensified by events over the weekend, which saw an increase in hostilities between Russian and the Ukraine. A sudden rise in the number of pro-Russian troops in and around the predominantly ethnically-Russian Crimea, a south-western region of the Ukraine, where the recent unrest has centred, led to fears of a possible outbreak of war between the two nations. Several Ukrainian army bases were surrounded by forces thought to be Russian, and a stand off between two camps ensued, although no actual fighting broke out. Elsewhere in the region Ukrainian forces simply surrendered or fled. The regional airport and the Crimean parliament remained under pro-Russian control. The U.S threatened to begin economic sanctions against Russian if it invaded the Ukraine; European authorities attempted diplomacy. There was talk of the conflict escalating into one of the worst of the 21st century. On the data front Capital Spending in the 4th quarter showed a disappointing pull-back with only 2.8% growth versus the 4.9% expected, although it was still higher than the 1.5% of the previous quarter. Capital Spending excluding software also fell below-expectations of 4.6% but also beat the previous result.