Obama speech tames risk rally for now

• Peace at risk in Ukraine according to Obama

• UK retail sales to bounce back from January slump

• NZD and AUD pound higher on exports and rebalancing

• US GDP expected to slip, we look for strong jobless claims

A speech by President Obama sent risky assets lower yesterday following another day of lacklustre trade. The overall tone from the President was hard-nosed and suggested that the US was not scared of increasing the tensions in the area. Obama said that “casual indifference” would ignore the lesson written in the cemeteries on this continent and that message would be heard, not just in Europe, but in Asia and the Americas, Africa and the Middle East. The market did not like this or a line that “progress in peace is at stake in Ukraine” and took risky assets lower with the haven currencies benefiting slightly but without current trends being broken.

A response from Russia is likely over the course of the coming days. Rebuttals and reinforcements of positions are the bread and butter of international spats such as this. If the tone is combative, which we would wager it would be, then further weakness in assets are likely.

NZD has driven to a 11-month high overnight following a great trade surplus number. The surplus of $817m was the highest since April 2011, built on the third greatest amount of exports on record at $4.56bn. Combined with inflation pressures stemming from the Christchurch rebuilding effort and the RBNZ’s pronouncements of further increases in interest rates in the coming quarters are looking for likely. AUD also held up recent gains close to 4-month highs as RBA Governor Glenn Stevens said yesterday that the early signs of a transitioning of the Australian economy from one built on mining to one that revolves around consumer spending are being seen.

Comments from Fed Member Bullard overnight has given USD bulls a bit of encouragement. In a speech in Hong Kong, President Bullard echoed a lot of what Janet Yellen said last week; that tapering was data contingent and that it would take a significant shift in data to move the tapering schedule one way or the other. But most importantly, that Yellen’s comments on tightening after 6 months “weren’t much of a surprise” and “not too different from market views”. We will have to wait another month before we see whether other members agree via planned speeches and the next Fed meeting.

US GDP today is unlikely to shift rate expectations and therefore the USD too much. GDP is stale data at the end of the day, especially when we get down to the second revision, but the markets are looking for the annualised figure to dip from 2.7% to 2.4%, a QoQ number of 0.6%. We will be taking a closer look at jobless claims as they are currently running at a level that would suggest a big payrolls number next week. Both numbers are due at 12.30 GMT.

Before that, GBP watchers will be hoping for a decent retail sales number from the UK form February. January’s retail sales numbers disappointed to the tune of a 1.5% fall following a strong December number and we would hope that some normality is brought back to what has been a volatile series of late. Robert Chote, head of the Office of Budgetary Responsibility, said yesterday that the strength of the UK economy will slow later this year because it has been driven by consumers dipping into their savings.

Even with wages rising, we doubt that the shortfall will be made up soon, but heavy discounting in February may allow some strength to this figure.

Have a great day.