The dollar's steep drop from Monday's 21-month high against a basket of currencies followed hope that the conflict in Ukraine could stabilize, but those hopes could soon dissipate and the sharp, volatile moves reflect extreme uncertainty, said UniCredit.Ĭurrency markets are "characterized by very large swings," even on an intraday basis, with investors forced to "operate on day-to-day logic, just tracking news as it appears on the screens." This is exacerbating volatility in major currencies, UniCredit said.
The vulnerabilities are impossible to fully assess in advance of problems emerging, but these are likely to be greatest in Europe, Capital Economics noted.
"If financial contagion does spread to major economies, it is likely to be because losses are concentrated in a systematically important institution." This limits the risk of financial contagion from the collapse in Russia's economy that is underway. The rest of the world's direct financial exposure to Russia has fallen in recent years and, in aggregate, is now small, said Capital Economics. They expect the annual core inflation to have risen to 6.4% in February from 6% in January, according to the poll. The headline annual CPI is expected to have risen to 7.8% in February from 7.5% in January, according to The Wall Street Journal's poll of analysts. CPI data release should still cause investors to reassess a 50-basis-point interest-rate rise by the Fed in March as more likely even though market pricing still centres around a rise of 25 basis points for next week's meeting, said Mizuho's rates strategists. Thursday, and economists forecast that inflation climbed further in that month, having reached a four-decade high in January.Īnother bumper U.S. consumer-price index data for February will be published at 8:30 a.m. and Europe could see sustained inflation and lower economic growth, as elevated energy prices eat away at household spending on other goods and services. High oil prices have prompted concerns that the U.S.
It is expected to downgrade its forecast for economic growth and raise its outlook for inflation, which has been fueled by surging energy prices and a decline in the euro against the dollar. The European Central Bank will release a statement on its monetary policy and interest rates at 7:45 a.m. There's very little conviction in this market," said Agnès Belaisch, chief European strategist at the Barings Investment Institute. "Yesterday there was this rally and already you can see profit-taking. The latest rally "still seems like a huge leap of faith on the part of markets, particularly where Russia is concerned where there is scant evidence that they can be trusted on anything," added Michael Hewson, an analyst at broker CMC Markets. "No result from today's meeting could send markets back to square one." "I have an issue with just about all the premises for the whipsaw, peak-Ukraine, rally," said Jeffrey Halley, an analyst at broker Oanda. It will be the first cabinet-level meeting since the full-scale Russian invasion two weeks ago. While there have been some signs from Ukrainian officials that compromises to end the war are on the table, a diplomatic solution remains just a hope as the foreign ministers from Ukraine and Russia meet in Turkey Thursday. Stock futures fell and oil prices rose as investors monitored developments surrounding Russia's invasion of Ukraine and awaited fresh inflation figures.
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