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Daily market commentary: The Euro is on the front foot as Russian and Ukrainian officials are due to meet today in Turkey
The Euro is on the front foot in relation to other major currencies during early Tuesday trading. The single currency is finding support as Russian and Ukrainian officials are due to meet later today in Turkey. The Eurozone is particularly vulnerable to the conflict on its eastern edge, because of the geopolitical risk it poses and the continent’s dependency on Russian gas and oil. A positive outcome from the talks, which in this case would be a ceasefire and potentially even an agreement to bring the hostilities to an end, would release some of the pressure under which the single currency has been under, helping to lift the confidence of economic agents in the region. However, such an outcome is far from guaranteed and therefore today’s gains must not be taken as a the beginning of a recovery, with the euro likely to remain squeezed by the economic impact of the Russian-Ukrainian war, high inflation and the comparatively dovish stance of the ECB, in relation to that of the Fed and other major central banks.
Gold prices are down during early Tuesday trading. The appeal of the precious metal is declining among investors, as talks between Russia and Ukraine trigger hopes of a de-escalation in the conflict, while US treasury yields continue to rise. A ceasefire between Russia and Ukraine is a potential outcome of the talks between officials from both countries occurring later today in Istanbul, raising hopes amongst investors and lifting risk appetite, a dynamic that penalizes the safe-haven gold. Another factor also weighing on gold derives from rising US treasury yields, driven by the Fed’s hawkishness, which increase the cost of holding the non-yielding precious metal.
Share markets edged higher on Tuesday, alongside US Futures, confirming yesterday’s gains after renewed diplomatic talks over Ukraine lifted market sentiment higher. Investors are betting on geopolitical improvements in Eastern Europe, as diplomatic talks between Russia and Ukraine continue this week, with both belligerents willing to reach ceasefire. On the other hand, the lack of appetite for Treasuries boosted by the pricing of a much more aggressive stance from the Federal Reserve by investors, is also benefittin share markets as cash rotation from safety to risk continues. Automakers are seeing the best performances so far while volatility remains high towards energy shares as investors struggle to assess how the current virus resurgence in China will impact oil demand in the long run. Volatility may be on the rise later in the afternoon as the US CB Consumer Confidence and JOLTs releases loom alongside speeches from ECB and FOMC members.
Pierre Veyret– Technical analyst, ActivTrades
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Experienced writer and journalist, working in the global online trading sector, Steffy is the Editor of LeapRate. She has previous experience as a copywriter and has been with the company since January 2020. Steffy has a British and American Studies degree from St. Kliment Ochridski University in Sofia.
