Risk Rattled in Wild Ride

Ukraine worries and Draghi jawboning reversed risk trades and hit the euro on Thusday. The yen was the best performer while EUR lagged. The BOJ minutes are up next.

What looked like a day of multiple breakouts turned into a day of mass disappointment. EUR/USD, NZD/USD hit long-term highs early in the day but finished in tatters. Several yen crosses  were surging higher then were cut down.

The jobs report in Australia and a rate hike from New Zealand set the stage for upbeat US traders. The momentum continued when initial jobless claims beat expectations and fell to the lowest since November. Worries crept in with the US retail sales; the February data beat marginally but sharper downward revisions to January data showed a stunted trend. The control group rose 0.3% compared to 0.2% expected but the prior was revised to -0.6% from -0.3%.

The report left the market uneasy but it was Ukraine that turned doubts into fear sending the S&P 500 22 points lower and yen crosses more than 100 pips from the highs.

The New York Times featured a story about troop buildups near the border and there were various reports of scuffles and rumors of invasions of Eastern Ukraine. The final straw may have been comments from Kerry promising “serious steps” if Crimea holds a planned referendum to join Russia on Sunday.

Previous US threats have been vague and this one was too, but it contained a timeline for US action and gave the market the sense the crisis is escalating.

EUR/USD was already slumping from the two-year high of 1.3967 when Draghi hit the wires and said the euro exchange is increasingly relevant in assessments of price stability. It's his first direct comment on FX in months and knocked EUR/USD as low as 1.3846 before a modest recovery later.

The main focus will be on Ukraine in the day ahead but the BOJ minutes (of the Feb 18 decision, not this week's meeting) will be released at 2350 GMT. Discussion about possible counter measures to the April tax cut will be the highlight.