On Sunday it was announced that around 90% of Crimeans voted for the region to quit Ukraine and join Russia. The polling results dampened risk appetite, as investors grew anxious that global economic output could be weakened as a result of the crisis in Eastern Europe.
The Pound to Australian Dollar exchange rate (GBP/AUD) jumped higher by around half a cent to 1.8480 in response the data.
The Crimean vote put further pressure on US and EU officials to impose trade sanctions on Russia. A spokesman from the Whitehouse said that the referendum is “contrary to Ukraine’s constitution”, and stated that “the international community will not recognize the results of a poll administered under threats of violence and intimidation from a Russian military intervention that violates international law”.
Many analysts expect that a set of sanctions from the West, followed by counter sanctions from Russia, will lead to a period of economic uncertainty that will take its toll on growth over the next few months. This scenario is likely to damage demand for the high-risk ‘Aussie’ Dollar, as evidenced by last night’s GBP/AUD spike.
Economic Calendar
The Australian economic calendar is fairly sparse this week. The only major data release is set to be the Conference Board of Australia’s Leading Index for January, which is used to measure fluctuations in short-term economic forecasts. The index came in at 0.8% for December, but economists have yet to predict the outcome for January’s survey.
There are two key ecostats due for release later today.
Eurozone CPI is predicted to have remained at 0.8% during February, which is likely to have a neutral bearing on the single currency. However, demand for the Euro could deteriorate rapidly if the Consumer Price Index prints at 0.7% or lower. Deflation concerns continue to weigh over the single currency; speculation that the European Central Bank will loosen monetary policy further could proliferate if CPI inflation is seen to be on a downward spiral.
US Industrial Production is forecast to have rebounded from a -0.3% contraction in January to post a 0.2% expansion in February. If the report prints inline with the market consensus then the US Dollar is liable to appreciate against its major currency rivals.
The Pound to Euro exchange rate (GBP/EUR) is currently trading below key psychological resistance at 1.2000 and the Sterling to US Dollar exchange rate (GBP/USD) is trading just above support at 1.6625.
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