Tensions rose sharply on Friday when a US official said that a Russian attack on Ukraine appeared imminent and could take place before the end of the Olympic Games. The US equity market plunged as well as long rates (the US 10 year is back below 2%), with investors rushing to the safest assets such as US Treasuries (lower rates = higher Treasuries prices). The dollar strengthened, with the exchange rate against the euro falling from 1.14 to below 1.1350. Commodity prices also soared. These trends were confirmed in Asia and at the opening of the European markets this morning.
In the current context, it is important to keep in mind that all this only adds to upward inflationary pressures. Russia is a major energy producer and we should not forget that Ukraine is a major food (grain) supplier. On Friday, the fall in the University of Michigan’s confidence index to its lowest level in 11 years confirmed the damage of soaring prices on the purchasing power of US households. The market will be tossed between these two pitfalls over the next few days: geopolitical risk and inflation.
No economic data today but the ECB President in front of the European Parliament and James Bullard, the St Louis Fed President and supporter of an aggressive Fed action, on CNBC.
Get more analysis and data with our Premium subscription
Ask for a free trial here
Necessary cookies are absolutely essential for the website to function properly. This category only includes cookies that ensures basic functionalities and security features of the website. These cookies do not store any personal information.
Any cookies that may not be particularly necessary for the website to function and is used specifically to collect user personal data via analytics, ads, other embedded contents are termed as non-necessary cookies. It is mandatory to procure user consent prior to running these cookies on your website.