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Geopolitics churn up risk aversion

The global information space was abuzz On Friday afternoon with reports of heightened tension at the Russia-Ukraine border amid a mounting risk of hostilities. Many Western countries have told their citizens to leave Ukraine. Some countries are reducing the number of diplomats in the country, while other countries have transferred their diplomatic missions from Kiev to Lviv.

Against this backdrop, investors on Friday evening started to bail out of risk-sensitive assets, primarily equities and high-risk currencies. US stock indices retraced to levels seen at the end of January. Risk currencies experienced a sell-off amid a flight to safe haven currencies. Conversely, the US dollar, Swiss franc and Japanese yen outperformed.

On Friday evening, the University of Michigan Consumer Confidence Index for February was released. The print turned out to be considerably worse than anticipated at 61.7, compared to 67.5 expected, but this did not prevent the dollar from strengthening.

The EURUSD pair fell to 1.1329 on Friday amid geopolitical risks, retracing to February 3 levels. On Monday, the pair breached Friday lows, reverting to a descending channel. The medium-term downside target at this point is 1.1121. 

Today at 19:30 (GMT 3) a closed meeting of the Board of Governors of the Federal Reserve System will be held under expedited procedures. Matters under consideration include determination of the advance and discount rate. The federal funds rate (FFR) will not be discussed at the meeting.

Upcoming macro releases (GMT 3):


  • 19:15 Eurozone: ECB President Christine Lagarde speech


  • 13:00 Germany: ZEW economic sentiment (February)
  • 13:00 Germany: ZEW current conditions (February)
  • 13:00 Eurozone: GDP (YoY, preliminary Q4)
  • 13:00 Eurozone: GDP (QoQ, preliminary Q4)
  • 13:00 Eurozone: ZEW economic sentiment (February)
  • 16:30 US: PPI (YoY, January)

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