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Analysis
A weaker China PPI/CPI print also allowed traders some breathing room to add risk, as the weakening picture in Chinese price pressure offers the Chinese authorities further room to ease monetary policy.
I’m not sure anyone truly knows what’s going on when it comes to the Russia/Ukraine situation, but after 12 hours or so of net constructive headlines, there seems to be a growing belief that Putin is leaning on a diplomatic solution and the market has walked back some positioning placed for an all-out escalation. News flow can still shift rapidly, and I suspect there will be more twists and turns that suggest geopolitical hedges – long crude, Gold, volatility, and short risk - can make a comeback. It’s hard to know what to believe though and there is a lot of misinformation and while many are now well read on the subject, we’re far from experts in this complex field.
Pink – S&P500 (inverted), white - USDRUB
(Source: Bloomberg - Past performance is not indicative of future performance.)
As I discuss in the ‘Good as Gold’ video (at top of the page), to try and keep life as simple my guide on this is USDRUB – it seems to be the lead for equities, gold, and risk assets more broadly. So, if USDRUB goes lower the market acts by reducing geopolitical hedges and vice versa. Keep this pair on the radar, and if it heads through support at 74.28, not that support is going to defend this if the headlines turn really sour, then hedges will be reduced – the near-term fortunes seem to be directed by USDRUB.
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