According to Bloomberg News, with the week kicking off on Monday, traders have just one certainty. That is a continuation of another volatile stretch, with the Russia Ukraine war upsetting financial markets.
The looming uncertainty for traders
Following an appetite for safer havens that have lifted the currency gauge to the highest since July 2020, the US dollar will now be in focus, and the US Secretary says that the Biden Administration, along with the allies, is planning upon a Russian oil embargo.
As trading opened in Asia, the euro was seen to rise, continuing recovery in the last two years from the lowest level. It reached the mark on Friday as the investors were looking for ways to challenge Europe’s growing crisis. Euro witnessed a modest gain on Monday trading following a decree allowing Russia and its companies to pay in rubles to the foreign creditors, warding off defaults while the capital controls are still in place.
Currencies that are resource-linked are expected to be in the spotlight as supplies related to the war are expected to increase in price for crops, metals, energy alongside the bond market in the United States. In the meantime, China’s yuan may respond to signals anticipating that more of the domestic stimulus is about to come.
Bloomberg News reports that as investors are still trying to come to terms with the severity of the war, with accusations rife of “nuclear terrorism,” amidst reports pouring in that Russia bombed an atomic power plant and that there was a mass exit of refugees from Ukraine to the other European countries, volatility has escalated. A series of swings in the US Treasuries climbed last week to a mark recorded as the highest in two years, following a drop in the 10-year drop in the yields below 1.7%, with thinning of market liquidity. Also, signals of funding stresses cropped up in the financial markets.
The swap market that is Fed related is pricing in quarter-point increase less than certainty. An even hotter than anticipated inflation print might put a 50-basis point rise back on the table.
In Europe, where traders expected that there might be a tighter policy towards the end of this year, far less conviction is currently seen in the market. According to the Swiss National Bank, a member of the governing board, policymakers might intervene if the need is felt.
Bloomberg News reports that Russian assets will continue to remain focused since the ruble capped the worst week in several years. The Russian equity market is expected to stay closed until Wednesday, with local exchanges seeing a dampening of the impact of financial sanctions on the domestic arena investors.
