Here’s what you need to know on Friday, February 25:
Safe-haven flows dominated financial markets for most of Thursday and the US Dollar Index (DXY) hit its highest level since June 2020 at 97.73 before pulling back at the end of the day. American session. Markets remain relatively calm early Friday and the DXY extends its corrective slide as investors brace for another turbulent day. The European Commission will release the February sentiment report and data from the US Bureau of Economic Analysis’ Personal Consumption Expenditures Price Index will be featured in the US Economic Record later today. However, developments surrounding the Russian-Ukrainian war are expected to remain the main market driver heading into the weekend.
Following Russia’s decision to launch an attack on Ukraine, Western countries announced a series of sanctions on Thursday. The EU, UK and US refrained from cutting Russia off from the SWIFT system while noting that this option was still on the table. Additionally, Russia’s energy sector has also been largely excluded from sanctions, alleviating concerns about the negative impact of sanctions on the global economy and inflation. Nevertheless, “today will be the most difficult day,” a Ukrainian government adviser said earlier in the day and noted that Russia planned to use tanks to break through Kyiv. Moreover, Ukrainian President Zelenskyy said that the sanctions imposed on Russia were not enough.
Heading into the European session, the DXY was down 0.2% on the day at 96.85, the 10-year US Treasury bond yield was little changed at 1.96% and the West Texas Intermediate rose 1.75% to 94.60. U.S. stock index futures, meanwhile, posted small daily losses, indicating a cautious mood in the market.
The markets tremble during the Russian invasion of Ukraine but quickly discover Realpolitik.
EUR/USD is staging a rebound and trading in positive territory above 1.1200 after losing over 200 pips and posting one of its biggest one-day declines in several months on Thursday.
GBP/USD fell to its lowest level since late December at 1.3271 on Thursday but managed to erase some of its losses. The pair was last seen up 0.4% on the day at 1.3426.
Gold hit its highest level since September 2020 at $1,974 on Thursday, but reversed dramatically in the second half of the day to close flat just above $1,900. XAU/USD regained its bullish momentum early on Friday and started to climb towards $1,920.
Although the JPY managed to outperform its risk-sensitive rivals such as the EUR, GBP and AUD on Thursday, USD/JPY gained ground on broad USD strength and climbed to the 115.50 area. The pair consolidates gains but holds above 115.00.
Bitcoin fell below $35,000 but took advantage of risk reversal late in the US session on Thursday and closed above $38,000. BTC/USD is posting modest gains early Friday but remains below $40,000 for now. Ethereum is fluctuating in a relatively tight range above $2,600 after recovering from the multi-week low it touched at $2,300 on Thursday.