So as discussed last week, trying to predict what would happen with the geo-political situation was almost anyone’s guess. However interestingly the players that where most correct was the US state department. Remember US Secretary of State Anthony Blinken did actually outline that Russia would attack Ukraine and the methods it would use. This accuracy may explain why the US market reactions were less severe than Europe and Asia as the invasion has been priced here for several week one could argue.

We also discussed last week the playbook for what was likely to happen in FX and oil. As seen on Thursday 17 of February when Russia was first announced was recognising Donetsk and other separatist areas the EUR fell and Oil spike. On news Russia was invading last Thursday the EUR/USD dropped from $1.1287 to a low of $1.1209. As the day wore on EUR/USD fell to $1.1106 a two year low before recovering the $1.12 handle.

Brent moved from $98.08 a barrel to $100.08 and kept going all the way to $105.25 its highest read since March 2014. It has eased on the announcement that the US and other allies (Australia included) will draw down on their oil reserves, but this would be unstainable medium term. Cable also took a solid hit falling consistently moving from $1.355 to $1.34 on the invasion
news to a low of $1.3273. The Russia-Ukraine conflict will clearly dominate FX for the weeks to come however we can’t forget that on March 16 the Federal Reserve will meet to raise rates.

Last week Cleveland Fed president Lorretta Mester said a March hike is still appropriate, barring any "unexpected turn in the economy." She stated that the geopolitical issues are
adding to inflation and growth risks near term. Yet her outlook was still for ‘a strong expansion in the economy’ this year. Atlanta Fed president Raphael Bostic stated he open to the idea of four or more rate hikes this year. His view on the Ukraine situation is that it would not affect expectations for March.

Richmond Fed president Thomas Barkin stated "time will tell" if the developments in the Ukraine alter the FOMC's outlooks, but believes it unlikely. In short rates will rise on March 16 it’s a question by how much.