The ongoing military intrusion of Russia into Ukraine has entailed tough sanctions from the US and its European allies. Besides, the invasion has set off shock waved across global financial markets.
A few influential Russian banks have been cut off from SWIFT. Russian leader Vladimir Putin and several high-ranking officials have been blacklisted. Apart from personal sanctions, the West is imposing severe economic sanctions on key sectors. Analysts share the viewpoint that the Russia – Ukraine crisis is unlikely to be defused soon. Despite the fact, the Asia – Pacific trade opened on Monday on the positive territory. Asia seems to treat the war in Ukraine as a local conflict in East Europe. Futures on European and US stock indices are trading sharply lower as expected. The reason is obvious. The EU, the US, and Canada are hostile to Russia in this geopolitical standoff.
On Forex, the trading day began with an advance of the US dollar, the Japanese yen, and the Swiss franc. On commodity markets, gold received a boost. Demand for government bonds of high-income nations is rising. The bond market is trading steadily in the European pre-market. We can assume that investors are pausing for thought, monitoring developments in the military conflict. Western investors and governments are alarmed by the assertive policy of the Kremlin.
We believe that a lot will depend on how quickly the Kremlin's special operation on the territory of the former Ukraine is resolved. If it is completed this week, and followed by a humanitarian mission focused on cleaning the country from the remnants of the nationalist battalions, then we can expect the West, primarily Europe, to soften its rhetoric aiming to start negotiations between the Russian Federation and the consolidated West. In the meantime, until this moment, we believe that the markets will remain under the influence of the events in the former Ukraine. High volatility will persist. Today trading in Europe will begin with the fall of local stock indices. The same is true about the North American markets. On the whole, we do not yet predict a large-scale collapse of the entire global financial market, as long as the conflict in Ukraine remains local. Western countries are not fully involved in it from a military point of view. If there is no direct conflict with the West before the end of the operation, then demand will revive in the markets that will push stock market quotes up again. Under these conditions, the US dollar and other safe haven assets are set to fall in value.
Forecast for today
Gold price is likely to test the recent historic high at $1,973.60 a troy ounce on the back of escalating hostilities in Ukraine.
The North American benchmark WTI might climb again as high as $100 a barrel amid a new wave of sanctions from the US and its European allies against Moscow.
