Soft US Response Boosts Risk Trades

The US delivered its response to the Crimean referendum and it certainly didn't mark an escalation of the crisis. The Australian dollar was the top performer while the yen lagged in a classic risk rally. The RBA minutes and Chinese property price data are due later.

The focus of trading on Monday was how the US would respond to the Crimean referendum. Last week, risk trades slumped after Secretary of State Kerry promised a “serious series of steps” on Monday if Russia allowed the referendum to go ahead.

The US and EU response was to freeze the personal assets of 11 top Russian and Ukranians related to Crimea. It was far short of what was feared and even some of the people who were sanctioned mocked the efforts, saying they had no assets within the reach of the US.

The sanctions from the US were so soft that Russia probably won't respond. The market sees it as a de-escalation of the crisis and/or an admission that Crimea is lost. Risk assets rallied with the S&P 500 gaining 1%.

Russia took steps to recognize Crimea as a sovereign state but that's likely just a formality on the way to annexation, which could come as soon as Tuesday.

Risk trades also benefited from mildly positive US data. Industrial production rose 0.6% in Feb beating the 0.2% consensus. The Empire Fed was fractionally below expectations at 5.61 vs 7.00 expected.

Looking ahead, at 0030 GMT, the RBA releases the minutes of the March meeting but with Stevens in wait-and-see mode it's a low risk event. 

At 0130 GMT, China releases property price data for February. On Monday, a Chinese property development firm with $560m of debt collapsed so there could be extra attention on the sector.