Ukraine – Russia tensions; rouble continues the drop
Russia-Ukraine peace talks have made no headway, and despite Germany’s resistance to a ban on Russian energy imports, oil futures have fallen from a 14-year high reached on Monday. Analysts expect the supply shock to linger and harm growth in the coming months.
A convoy of buses are on their way to Mariupol to evacuate civilians from the southern port, which has been cut off from food, water, electricity, and heat for more than a week and has been subjected to incessant bombardment as a result of the conflict.
According to the United Nations, the number of refugees who have fled Ukraine has surpassed 2 million, making it one of the fastest exoduses in contemporary history.
Against the dollar, the rouble has lost around 40% of its value since the beginning of the year, with losses dramatically accelerated following Russia’s invasion of Ukraine on February 24. The invasion prompted broad sanctions from governments throughout the world.
ECB meets later in the week; euro pares some losses
The euro plunged near a 22-month low of $1.0805 on Tuesday as the crisis in Ukraine cast a shadow over Europe’s economic prospects, while commodity currencies took a pause from their weeks-long surge.
The European Central Bank (ECB) meets on Thursday with the threat of stagflation hanging over its heads, prompting economists to predict that policymakers will delay rate hikes until late in the year.
Dollar and stocks retreat
The dollar index is down from the 22-month peak, while the US stock futures are planning for a marginal positive open after a strong bearish momentum in the preceding sessions. The market has once again begun to price in additional Fed tightening. Recent statements are bolstering the belief that the Fed is on track to begin the tightening cycle with a 25-basis point increase.
The yen slipped marginally to $115.70, as rising oil import costs contributed to Japan’s largest current account deficit since 2014 in January, according to the Bank of Japan.
Pound advances somewhat; gold holds above $2,000
The pound gained ground after the drop below 1.3100 on Monday versus the dollar while euro/pound is heading north, finding support at the 0.8200 round number after it reached its lowest level since June 2016, in part as a result of diverging policy expectations.
A lull in commodity currencies was observed, with the Australian and New Zealand dollars reversing early gains from their four-month highs reached on Monday. Gold prices remain above $2,000 per ounce, continuing the sharp upside rally.
