US Dollar Still Winner As Russia Breaks Up Diplomatic Talks,

Risk aversion took over financial markets at the beginning of the week amid escalating geopolitical tensions in Eastern Europe.

The US dollar managed to advance against its high-yielding rivals but lost ground against safe-haven ones. Mid US-afternoon, Russian President Vladimir Putin recognized Donetsk and Luhansk in Eastern Ukraine as independent states signed a decree “on friendship and cooperation.”

The world sees this decision as the first step towards an invasion, which also invalidates talks with Western nations. Earlier in the day, EU’s Josep Borrel, High Representative of the Union for Foreign Affairs and Security Policy, said that the EU is ready to ‘strongly act if Russia recognizes Donbass independence’, which Putin did by the end of the American afternoon.

Borrel tweeted: “The recognition of the two separatist territories in #Ukraine is a blatant violation of international law, the territorial integrity of Ukraine and the #Minsk agreements”

Markit published the preliminary estimates of its February PMIs for the EU. The services sector posted a nice comeback with the German index up to 56.6 and that of the EU printing at 55.8. The manufacturing PMI in both economies came in below expected, but well above the 50 level that divides contraction from economic expansion.

The EUR/USD pair is approaching 1.1300 while GBP/USD battles around 1.3600. Commodity-linked currencies are down vs the US dollar, despite gold is trading above $1,903 a troy ounce amid demand for safety, while crude oil prices surged on disruption fears, with WTI now changing hands at $92.75 a barrel.

US markets are still closed on the occasion of the President Day, but stocks futures edged firmly lower on Russia/Ukraine news. European and Asian futures are also down, hinting at an upcoming risk-off Tuesday.