Currency markets started the week nervously eying tensions in eastern Europe. And, this is with the safe-haven yen not far from a two-week high. Meanwhile, the euro was on edge given the energy security and economic implications for Europe of a war in Ukraine. At Barclays they stated that Russia-Ukraine tensions are starting to dominate risk sentiment and price action. The market is likely to keep chasing headlines without any clarity on the eventual outcome.
The euro took a small lift early in the Asian session after the office of French President Emmanuel Macron said that the U.S. President Joe Biden and Russian President Vladimir Putin have agreed in principle to hold a summit on the Ukraine crisis. Also, they added that such a meeting would be impossible if Russia invaded Ukraine. The yen lost a modicum of ground on the dollar following which comes after a week of heightened tensions spurred by Russia’s military build-up on Ukraine’s borders.
The euro was 0.12% higher at $1.13340. The yen was at 115.05 per dollar. Safe havens like the yen and Swiss franc have been the major beneficiaries of the geopolitical tension in eastern Europe. The euro had been hurt and the yen boosted by the announcement from the Belarusian defence ministry that Russia would extend military drills in Belarus. The moves in currencies aligned with moves in risk sentiment across asset classes. U.S. share futures slipped in early trading, before turning positive after news of the possible summit.
The currency markets are also still concentrating on central bank policy. And that is with divergences in the speed and size of different markets’ interest rate hikes a major factor. The markets will be closely watching a string of public remarks from U.S. Federal Reserve policy makers. The pound was drifting somewhat at $1.36000 in the middle of its recent range. Public remarks are also due from several BOE policy makers as well. Bitcoin recovered a little from a mild bruising. The world’s largest cryptocurrency was up 2% at around $39,000. Early it touched a new two-week low of $38,210.