USD Claws Back Against JPY

EUR/USD
Today saw a reversal of the recent trend of risk-off sentiment as fears subsided amid reports that Russian President Putin ordered troops engaged in military exercises to return to their bases. As a consequence markets saw a weaker USD and JPY as the demand for safe-haven assets receded. This saw the pair move higher despite a lack of tier 1 macroeconomic or economic commentary from the Eurozone to act as a guide for price action. The move higher for the pair was exacerbated in the first half of the session amid a weaker GBP which was reflected in EUR/GBP following the lower than expected UK construction PMI number. With little on the calendar from the Eurozone until Thursday, focus still ultimately continues to remain on the upcoming ECB rate decision given the speculation surrounding a potential rate cut by the central bank this week. Today saw the release of a dovish think tank report which said ECB will most likely take action this week to depress short-term interest rates following a weak inflation outlook for the medium term.

Emerging Markets
In a correlated move amid the weaker USD, RUB regained some ground against the greenback after yesterday’s heavy losses which saw Russian stocks fall 10% in one session. In contrast to yesterday, political tensions were reduced as a result of the already discussed reports of Putin recalling Russian troops. Commentary up until today suggested that any move by the west would involve sanctions upon Russia and thus presented markets with the aforementioned fall in Russian stocks and capital outflows from the area. Considering this, markets may have been made nervy by commentary from an advisor to Putin, Glazyev, saying that Russia can dodge any proposed US sanctions by switching to other currencies and creating its own payment system. However, Kremlin official later clarified that Glazyev's comment on USD do not reflect official position and thus cemented the move lower for USD/RUB. Parallel to this move, EUR/HUF managed to finish the session lower as a reflection of the restored view of emerging market currencies.

USD/JPY
One of the most common themes in FX markets as of late has been the dominating power of JPY across FX pairs, however due to the increase in risk-appetite in today’s session, markets actually saw USD claw back some territory against JPY. Markets initially reacted to the news that President Putin ordered troops engaged in military exercises to return to their bases, which saw the pair move higher, a move that was then extended upon rhetoric from Putin that there is no need to send troops to Ukraine yet, military exercise had been planned long ago; use of force in Ukraine is a choice of last resort. It is also worth noting out of Asia that today saw the PBoC drain CNY 35bln via 14-day repos and CNY 50bln via 28-repos, with participants set to carefully analyse any commentary that will come out of the upcoming Chinese People's Political Consultative Conference) on March 5th. Whereby, Chinese authorities may justify an adjustment to the trading band as a protection against a reversal of the multiyear trend of hot money inflows into the state.