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Relatively short wave of optimism touched financial markets during London trading hours, as Ukrainian President V. Zelenskyy said that he believes there would not be war nor a wider escalation.
Economic Data
Markit flash PMIs for the EU, and the US were generally encouraging, indicating economic expansion in February as the world seems ready to put an end to the coronavirus pandemic.
Other Developments
The UK was the first to take action, announcing the country would sanction five Russian banks and three individuals, adding that this is just the first tranche of what the government is prepared to do. Also, Ursula von-der Leyen, President of the European Commission, tweeted that “the Union remains united in its support for Ukraine’s sovereignty and territorial integrity” and that “a first package of sanctions will be formally tabled today.”
Russia is the third-largest oil producer (behind the United States and Saudi Arabia) accounting for 11% of world production, of which is consumers only about a third and exporting the rest. Russia is also a major supplier of gas to Europe. Germany has advised that it will not grant regulatory approval for Nord Stream 2, the recently completed gas pipeline from Russia to Germany. This pushed up gas prices by 10%.”
A path towards de-escalation could also be a catalyst for a substantial repricing in gold, considering that expectations for a 50bp hike in March from the Fed have also eased as a result of the conflict. It is still expected that the crushing weight of a hawkish Fed to ultimately sap appetite for precious metals.
US President Joe Biden gave a press conference on the matter. Among other things, he said: “We have no intention of fighting Russia,” adding that US forces in Europe will help Baltic allies, but “these are totally defensive moves on our part.” According to Biden, the US and allies “will defend every inch of NATO territory and abide by the commitments we made to NATO.”
Soft words from Biden helped Wall Street to trim part of its intraday gains, pushing the greenback lower at the end of the day.
The EUR/USD pair remained lifeless around 1.1350, while the GBP/USD pair saw a little more action but ended the day around 1.3560. The USD/CAD retreated sharply ahead of the close and settled around 1.2740, while AUD/USD advanced for a second consecutive day and settled around 07220.
Safe-havens CHF and JPY edged lower against their American rival, while Gold Prices consolidated gains, with spot now trading around $1,900 a troy ounce. Crude oil prices edged lower, with WTI settled at $91.60 a barrel.
