FOREX: USD Finds Base on US Data, NZD/JPY Cemented Lower

Reuters carrying comments from Kremlin foreign policy aide Yuri Ushakov. He confirms that the bilateral talks in Riyadh between US and Russian delegations have concluded after four and a half hours. Says that the negotiations "went well", and that "It was a serious conversation on all issues". Goes on to say that a meeting between Presidents Vladimir Putin and Donald Trump is "unlikely to take place next week", although the conditions for such a meeting were discussed. The two sides also agreed on the identity of negotiators that would talk about possible peace talks in Ukraine. Ushakov says that any decision on when to begin formal talks on Ukraine would come from Putin. 

• Today's talks come as White House special envoy for Russia and Ukraine Keith Kellogg is in Brussels as part of a two-day visit for meetings with EU and NATO officials. Kellogg said on 17 Feb that no peace deal would be forced "on an elected leader of a sovereign nation", referring to Ukrainian President Volodymyr Zelenskyy.
• German Green MEP Sergey Lagodinsky posted on X earlier claims of what a Trump peace plan could look like: "According to my sources: the proposal by Trump consists of 3 stages: 1) a ceasefire 2) ELECTIONS in Ukraine 3) signing of a final agreement. [...] It must be very clear to us, Europeans, that elections MUST take place AFTER the final stage. Not before it. Also because the final agreement cannot be the result of a pro-Russia candidate possibly elected under stage 2)."

• The persistent and one-way slide in front-end implied vols signals the prevalence of vol-selling in G10 - a strategy that could be caught offguard by any renewed USD rally.
• No surprise to see atypically low FX options volumes yesterday given the US Presidents' Day holiday - and markets aren't doing much to make up for it today. Total notional traded is well below average for this time of day, and won't be helping the continued slide in vols: EUR/USD 1m implied has stabilised, but is still at a YTD low below 7 points.
• The persistent pullback in implied off January's highs may only run so far: realised 1m vols across EUR/USD and GBP/USD are still sticky and close to highs. While this will undoubtedly moderate given the recovery in spot, the realised/implied 1m vol ratio is abnormally high. This metric hit the highest level since 2022 this week - a further signal that the market's expectations for Trump to upend the market are yet to come to pass - likely due to the delayed installation of tariffs.
• That said, the pace of the decline in implied is significant: particularly as the market monitors a new tariff deadline for Canada & Mexico, an ECB projection meeting, the opening of US-Russia negotiations and the April 1st report on America First Trade Policy - all of which pose risks to the February fade in the USD Index, and present considerable event risk.

Figure 1: Realised/Implied vol rank, EUR/USD 1m realised/implied ratio

• Although the Stoxx600 is mostly mixed at least for Today, the Banking Index {SX7E Index} is again leading in Europe, that's a whopping 28.44% taken from the December low.
• Next upside resistance is now just above the Psychological 180.00 level, at 181.50, the April 2011 high.
• Further out, the 2011 high would be situated at 197.88.

(Chart source: MNI/Bloomberg).