Fears over Russia potentially making an incursion into Ukraine sent markets into a spin on Monday this week. At one stage the Nasdaq was down over 4% on the day before putting in a recovery. Heading into Wednesday markets settled ahead of the Fed’s meeting. Expectations were for the Fed to signal a more aggressive stance to combat rising inflation and these expectations were met. Oil markets stayed sup-ported on low inventory levels Tuesday evening. The American Petroleum Institute reported that US crude stockpiles fell by 875K barrels last week. The 8th decline in 9 weeks for oil.

Other key events from the past week

  • Risk: Russian & Ukraine, Jan 24: The EU, NATO, & the US prepared to potentially respond to a Russian incursion into Ukraine. Alongside oil, a key commodity that could rise is natural gas. Russia supplies 40% of Europe’s natural gas supply, so natural gas prices could spike higher on any Russian incursions into Ukraine.
  • USD: Interest Rate decision, Jan 26: Jay Powell took a hawkish pivot boosting the USD this week and did not rule out a 50bps rate hike for March. Powell said that the speed, size, and composition of the balance sheet unwind had not been discussed yet, but would be discussed in at least the next two meetings.
  • CAD: Interest Rate decision, Jan 26: The BoC held rates steady due to Omi-cron concerns. However, it was a bullish hold as the BoC removed exceptional forward guidance and Governor Macklem prepared markets for coming rate hikes in the press conference afterwards.

Key events for the coming week

  • AUD: AUS interest rate statement, Feb 01: The RBA is expected to turn more hawkish next week as all their criteria for a shift in policy has now been met. Expectations are that the RBA can set the AUD bulls running.
  • Seasonal trades: Copper’s hot in February: Copper tends to see a strong performance in February. Will that pattern repeat again this year? See the strong seasonal pattern here. 
  • GBP: UK interest rate statement, Feb 03: The BoE surprised markets with a 15bps rate hike in December’s meeting. Sonia futures are pricing in 100bps of rate hikes still to come this year. Watch out for political risk for the GBP next week too as UK’s PM Johnson faces a potential leadership challenge.