A slight softening in tensions around the Ukrainian situation has allowed riskier assets within markets to pull a little higher overnight although the USD remains close to a 1 month high this morning ahead of the US CPI report this afternoon.

News that arrangements were being made for the black boxes of the downed flight MH17 and the bodies of the fallen to be passed into Malaysian and Dutch authorities respectively was greeted well by the markets as it marks a slight pullback in aggression in the area. Markets are somewhat circumspect about what is going on however and seem to be looking for a diplomatic resolution to a situation that may have already gone too far for military sabre-rattling. For the first time in this crisis, it looks like the Kremlin is in some form of damage control setting and may be prepared to deal in a bid to make the issue “go away”.

A UN resolution was passed unanimously last night to investigate the crash independently of Russian separatist oversight and should start later today. Serendipity would have it start at roughly the same time as a meeting of European Finance Ministers in Brussels where sanctions on Russia are set to be top of the agenda.

UK Prime Minister David Cameron has called for “hard-hitting” sanctions on Russia and, at the very least, an end to arms sales to the country from EU member states. Whether the French – whose arms are being sold to Russia – or Germany – which depends heavily on Russian energy imports – will back Cameron will become clear later today. A mis-step or an argument that fractures the EU resolve to this issue will only see riskier assets take a turn to the low side once again.

Overnight the majority of volatility has been in Japanese markets following a government revision of 2014 GDP expectations from 1.4% to 1.2%. Export weakness and a deeper than expected fall off in domestic consumption following the decision to increase sales taxes by 60 per cent on April 1st are being blamed for the cut in forecasts. Japanese yen is down around 0.2% against the dollar on the day and that shows you just how quiet the currency markets are at the moment.

Likewise AUD has squirted higher this morning following a speech by Reserve Bank of Australia Governor Glenn Stevens. Speaking about growth in G20 economies the Governor said that “the highly accommodative financial conditions will then have a more powerful effect in engendering real growth. A rising confidence dynamic could unfold. The prospects for profitable investments by businesses would be significantly improved.” The speech had no comments on the AUD strength however and as a result the markets have pushed it ever higher this morning.

The data calendar is dominated by the latest US inflation readout this afternoon at 13.30. Janet Yellen has previously referred to higher CPI readings as “noisy” and therefore will be hoping that year-on-year numbers do not come higher than the 2.1% reading last month. The release is due at 13.30 this afternoon and is expected to hold at 2.1% with a core reading at 2.0%.

Have a great day.

Indicative Rates Sell Buy
GBPEUR 1.2625 1.2646
GBPUSD 1.7065 1.7086
EURUSD 1.3504 1.3526
GBPJPY 173.21 173.43
GBPAUD 1.8170 1.8192
GBPNZD 1.9670 1.9695
GBPCAD 1.8323 1.8345
NZDUSD 0.8669 0.8683
GBPZAR 18.117 18.144
USDZAR 10.606 10.630
GBPPLN 5.2273 5.2496
EURJPY 137.08 137.29