War and Peace and Pips

One hundred verbal volleys are fired for every bullet that starts a war. Heavy doses of rhetoric and rumors spooked markets Monday but the cannons were silent. JPY was the best performer while GBP lagged but if anything the size of the moves was surprisingly small. The market now awaits a rumored 0300 GMT ultimatum for Ukrainian troops to stand down but don't forget the RBA decision.  Ahead of the RBA decision and rumoured Russia ultimatum, we have existing Premium trades in EURUSD, USDJPY, GBPUSD, AUDUSD, USDCAD, NZDUSD and AUDCAD. All these can be accessed in the Premium Insights.

Risk assets took a negative turn in US trading when reports/rumours began to circulate about an ultimatum, allegedly issued by Russia's Black Sea fleet commander. It warned Ukrainian ships in the near the Crimean to stand down or face assault. Nerves were later soothed when Moscow called the report total nonsense. Sporadic reports of armed Russians crossing the border also appeared.

In short, this is the fog of war and rumors circulate quicker than ever in 2014 markets can move faster than bullets. Ultimately, unless a WW3 erupts, markets will eventually settle but until then the fear-driven media will be a fearsome market force.

What stands out from Monday's trade was the unwillingness of USD/JPY to decline. March among the best months of the year for USD/JPY including five straight years of gains and mere 35 pip decline in the pair is a sign of resilience.

Economic data was overlooked but it also painted a good picture for USD/JPY. The Feb ISM manufacturing index hit 53.2 compared to 52.0 expected and the Markit manufacturing measure rose to the highest since 2010. The PCE report showed personal spending up 0.3% m/m vs 0.2% and inflation numbers met expectations.

In Europe, stock markets were battered and the euro slumped 70 pips to 1.3730 but Draghi was behind the scenes reiterating that inflation is a phenomenon driven by adjustments in the periphery and saying the glass is 'at least' half full.

But for the short term, the trade is in Crimea and the 0300 GMT deadline/rumour rules along with whatever rumours tomorrow brings. An event that will temporarily steal the spotlight is the 0330 GMT RBA decision. The central bank has shifted to neutral and is highly likely to stay there today as officials wait and see what the data brings so watch for AUD commentary.