Markets are facing continued sharp swings in price action as competing headlines around the Russia-Ukraine tensions continue to plague traders. Potential sanctions against Russia, false flags, skirmishes, and any ensuing tumult are generally giving a bid to oil and gold with the precious metal closing near the highs on Friday, just below $1900. These two assets, along with Nasdaq futures are a good proxy for the current market jitters.

Of course, worries about inflation and rising interest rates underpin investor thoughts as we eye the mid-March Fed meeting. Chances of a 50bp hike have receded since the release of the FOMC minutes last week and now stand at around 30%. Fedspeak will be important with several officials to look out for in the next few days, including Bowman and Waller. The dollar should remain supported, with help also from safe haven demand.

The RBNZ meet on Wednesday and markets are fully priced for a 25bp rate hike. This backs up two previous rate rises in October and November. The kiwi has been bought over the last few sessions and has enjoyed a decent month, though it is still the worst performing major this year against the dollar. The 50-day SMA and trendline resistance around 0.6728/30 cap upside in the near term in NZD/USD.

Major risk events of the week

21 February 2022, Monday:

–Eurozone PMIs: Strength in manufacturing remains apparent with consensus expecting a reading of 58.7 in February, one tick up from the prior print. But services demand is still muted and may be weighed by weakening household spending as soaring inflation squeezes disposable incomes. The euro has been shaken by the Ukraine standoff with the high 1.13s and then the 100-day SMA at 1.1398 proving resistance, while 1.13 remains support.

22 February 2022, Tuesday:

–IFO Business Survey: Economists expect a print of 96.4, up from last month’s 95.7 in Germany’s main outlook for morale. Sentiment rose for the first time in seven months in January as easing supply bottlenecks and Omicron tensions brightened the view.

23 February 2022, Wednesday:

–RBNZ Meeting: The chances of a 50bp rate hike are slim, below 20%, but the bank is set to revise its forecast peak in the cash rate to as high as 3%. Developments since the last policy review three months ago have been positive, though the faster-than-expected cooling in the housing market is a potential headwind.

–Aussie Q4 Wages: Analysts estimate wage growth at 2.4% y/y; a print above 2.5% would be the highest since late 2014. The RBA has made it clear wages are a key trigger for policy tightening, with markets currently pricing in over 4 rate hikes this year, with lift-off in June/July. AUD gained last week and remains very much a risk proxy.

25 February 2022, Friday:

–US Core PCE: The Fed’s favoured inflation gauge is forecast to hit 40-year highs at 5.2% from 4.9% in January. US inflation expectations are trending lower, and most analysts believe price pressures will slowly abate through this year as peak stay-at-home and stimulus effects are set to ease.