We wrote recently about how the residual risk that remained priced within (FX) markets was increasingly being removed from positioning data. Despite broad doubts about the credibility of claims of progress in Russia-Ukraine peace talks, the market scaled back demand for safe-haven FX, finding comfort in more moderate wholesale energy prices and macroeconomic conditions. More recently, the fact that Russia appears to have distanced itself from demands for settlement in Ruble for energy exports has continued to support risk conditions.
When highlighting the more balanced positioning in markets and more sanguine outlook we also stressed the propensity for complacency to feed into price action. Given that the market had largely discounted the risks of the conflict in Ukraine focussing instead on growth prospects and respective monetary policy outlooks, headlines emanating from the invasion once again hold the power to catch the market off guard.
One such headline and topic that holds the propensity to change the market’s relative calm surrounding the conflict in Ukraine is claims of war crimes. War crimes create and demand huge attention on the international stage. They are therefore significant and powerful catalysts of sanctions which have been a stronger driver of rates within currency markets, far more so than death tolls and geographical advance.
Via its significance to the global political economy and sanctions in turn, the claims and trials against war crimes allegedly committed could therefore reintroduce defensive demand within markets. Alongside technical resistance and price dynamics driven by the development of interest rate differentials, these allegations have undeniably contributed to EURUSD’s sell-off in the past three trading sessions.
Discussion and Analysis by Charles Porter
Click Here to Subscribe to the SGM-FX Newsletter
British Pound In itself not really a story but when a Member of the Bank of England’s Monetary Policy Committee opines on the UK currency, the market reacts. Yesterday it was the statement that if investors had not fully priced in the likelihood of further interest rate rises from both the Federal Reserve and the […]
Bank of England The UK’s Monetary Policy Committee will pronounce tomorrow and uppermost in their minds will be the UK Inflation release which came out first thing this morning. Because it is higher at 10.4% rather than significantly lower than last month’s annualised 10.1%, not only does the Bank of England have more egg on […]
Big Week With news about the arranged marriage of Credit Suisse to UBS announced on Sunday night following the bank’s CHF 50 billion liquidity line injection last week, repercussions from the failures of SVB and Signature Bank and fears for First Republic Bank despite a USD 30 billion multi bank rescue, expectations for a 50 […]