Risk sentiment in markets continued to fluctuate yesterday. Coinciding with a non-US trading day, liquidity was relatively thin with lighter volumes in markets frequently obscuring decisive market movements from the noise. Entering the European open yesterday morning, the market was positive with a stronger risk appetite compared with Friday’s close. This saw the US Dollar already fall in value by 0.7% versus the Euro since the start of trading in the far East. The weaker Dollar that was created by the stronger risk environment was built upon the foundation of news of Russia’s Vladimir Putin arranging to meet with US President Joe Biden. The diplomatic progress was enough to sustain the market’s relative calm.
However, as the session developed, news flow was able to up-end this progress with reports coming from Moscow that Russian troops had killed five Ukrainian troops entering its territory. The report, despite being unconfirmed, showed one of the first clashes between troops with Russia now having amassed 190,000 troops at the border. The Dollar subsequently reversed its earlier losses with risk assets, in particular Russian equities, instead taking considerable losses.
Thin liquidity yesterday, however, may have served to hide scope for even further adjustments in the value of safehaven and risk assets if tensions continue to rise. CFTC data published yesterday has shown us an insight into a market that has not yet priced in the potential for significant conflict on the border. Within the G10 space, the two key safehaven currencies, the Swiss Franc and the Japanese Yen, are the two most shorted currencies by funds. In turn, across the wider market it is the Brazilian Real that has amassed one of the most significant long-positions with investors taking considerable open market risk in a volatile and risk-sensitive currency. The dissonance between reality and financial positioning in much of FX may provide volatility across the market in days to come.
The short positions in defensive assets is something that could be squeezed quickly if tensions build and conflict ensues on a wider scale. The Dollar retains a more balanced positioning however it too could find further support under such conditions.
Discussion and Analysis by Charles Porter
Click Here to Subscribe to the SGM-FX Newsletter
Related Insights
Daily Brief – Delayed fuse
Charles Porter
Thu 30 Apr 2026
Delayed fuse Last night’s Federal Reserve decision held all the potential requirements for a momentous occasion. Markets had been ascribing a high value to the event with options pricing suggesting the decision posed a significant risk towards exposed assets. Ultimately, the potential swan song publication of Chair Jay Powell passed without incident. Claims from some […]
Daily Brief – Cancelled Travel Plans
Charles Porter
Thu 23 Apr 2026
Cancelled Travel Plans No, this time not because of the impending jet fuel crisis threatening continental travel as we discussed yesterday. Instead, I’m referring to the grounding of Vice President Vance whose trip to Islamabad, Pakistan was cancelled on Tuesday to avoid embarrassment. The Vice President was expected to travel on Tuesday to resume talks […]
Daily Brief – Sterling defence
Charles Porter
Tue 28 Apr 2026
Sterling defence Options markets are flashing warning signals for Sterling. It’s no secret that the forthcoming Bank of England monetary policy decision later this week poses a risk for the Pound. However, there are risks mounting further afield. The local elections on May 7th are a material risk for GBP, for example, with traders concerned the […]
