Yesterday, Reuters reported that USD strengthened against major currencies due to geopolitic tensions in Ukraine. However, it didn't last for long. Yellen's congressional testimony weighted on USD, and push it down in most of major pairs. Risk avoidance led investors to turn into JPY and CHF instead. These two topics will be the center of discussions in the market for some time onward.

Yesterday, Reuters reported that USD strengthened against major currencies due to geopolitic tensions in Ukraine. However, it didn't last for long. Yellen's congressional testimony weighted on USD, and push it down in most of major pairs. Risk avoidance led investors to turn into JPY and CHF instead. These two topics will be the center of discussions in the market for some time onward.  
geopoliticalGeopolitical Tensions In Ukraine: EU vs Russia
Seeds of conflict has long been embedded in Ukrainian soil, as Ukraine has been divided in two parts: supporters of Russia and those that want greater involvement with European Union. Since 2004, the first faction under Viktor Yanukovich and the second faction previously led by Yulia Tymoshenko, took the seat of leadership in turns, until Yanukovich reoccupied presidential seat in 2010. Yanukovich's government imprisoned Tymoshenko on accusation of abuse of power during her reign. Afterward, it was relatively calm, although protests continue to go on. But it exploded on February 18 when riot polic clash with protesters in Kiev that resulted in almost a hundred deaths and more wounded. In the following days, the two groups were dueling with weapons and political maneuvers.   
ukraineOn February 22, the Parliament impeached Yanukovich, and the next day appointed Oleksandr Turchynov  as interim president. Pro-EU protesters successfully took control of Kiev, whereas Yanukovich escaped after an arrest warrant was released on his person. The domestic dispute turned broader as Russian President Vladimir Putin instructed 150,000 troops to get ready, while the US repeatedly asked him to restrain from intervening. The last news today mentioned that Yanukovich is possibly hiding somewhere in Russia. In Ukraine, the dispute escalated as ethnic Russians in Crimea are calling for independence from Kiev and ethnic Tatar from the same region most emphatically refuse it.

The Influence of Ukraine Tensions On Forex
In financial market, investors see the threat of military clash as a danger, not only for Ukraine and Russia, but also EU. Particularly because Putin hasn't agreed to hold back. To this second, the conflict has lowered expectations on Euro and emerging markets' currencies, influenced USD to some degree, and boosted interest on traditional safe havens (JPY and CHF). Ukraine Hyrvnia and Russian Ruble has already tumbled earlier this week. Euro followed suit in the midst of uncertainty over European Central Bank's attitude on addressing symptoms of deflation. Ukraine tensions worsen EU outlooks.

Japanese Yen and Swiss Franc experienced bullish rally against USD and EUR during market's panic. Masafumi Yamamoto of Tokyo Praevidentia Strategy quoted by Reuters said, incidents in Ukraine will influence Dollar, at least until Ukraine May elections. However, he added, greenback's losses against yen will be temporary because actual armed clash is not likely to happen. In short, don't pass the news about Ukraine just yet, there may be more in it.

Other Pressures On The Market
In addition to Ukraine's tensions, another highlights in forex trading this week was Europe's deflation conundrums and US The Fed's monetary policy.
JanetCPI Inflation today is predicted to increase the pressure toward ECB to immediately arranging some measures to counter the threat of deflation. We have previously talked about Europe's low inflations that's been going on for some time and signaling a sluggish economy. Many wanted European Central Bank (ECB) to make a move as soon as possible and generate a better atmosphere for businesses. But so far, ECB's Mario Draghi dismissed the possibility of deflation in teh region, denoting unwillingness to take any measures.

In the US, The Fed's Janet Yellen's testimony expressed that the Fed will be more dovish. She reiterated the pledge to keep low interest rates as long as unemployment stays over 6.5%, and inflation outlooks lower than 2.5%. But at the same time, she implied that the Fed will provide qualitative guidance apart from the existing quatitative ones. The reason is, as Yellen said, the unemployment rate is not a sufficient statistic for the state of the labor market. Such talks eventually give off the impression of uncertainty for investors. Furthermore, she admitted that the Fed isn't sure that poor economic datas lately is purely because of the harsh winter. In short, the Fed will wait for more datas to come out to ascertain the exact trouble's source and decide the next step forward.

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