Turnaround Tuesday for the euro
War proxy assets have seen some proper volatility as real signs begin to emerge of genuine progress between Ukraine and Russia with a ceasefire and Russian military forces withdrawing from Kyiv. This has led to a de-escalation scenario being priced into key assets and hedges unwound rapaciously.
Commodities have borne the brunt of the geopolitical risk premium being unwound. Spot Crude completely erasing its early morning gains and slicing through the $110 level. US Oil/WTI has breached the $100 level. Gold got back below $1900 (pre-invasion level).
In FX, EURUSD has surged right through the 1.11 level and is up 1.3% at the time of writing. Markets are pricing 67bps of hikes by the ECB come December 2022 (2-year German yield has risen rapidly – proxy for ECB policy rate).
European equities, particularly European banks are running hard too, the headline indices such as the EUROSTOXX 50 and GER40 are up almost 3% (also above 50-day SMAs).
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