News & Analysis

Market participants this week have toyed with the idea of adding risk back into their portfolios as geopolitical conditions started to stabilise. While peace talks are yet to yield any material breakthroughs, sanction risk has largely played out with most of the restrictions at the disposal of Western governments already implemented. This resulted in moderated risk-off flows, with crude prices paring back gains while risk-sensitive currencies made a comeback. Looking ahead, the progress of peace talks will continue to be closely monitored by market participants as any signs of an end to the current war will likely reduce concerns of higher inflation and supply chain disruption. In addition to this, relations between the US and China will be closely watched as reports towards the end of the week ahead of Biden’s discussion with Xi suggest that the second-largest economy could publicly support Moscow. Beyond that, the UK Spring budget stands out as the most pertinent economic event as the budget is set to be announced amid the largest squeeze in real household incomes in over 30 years.

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Authors: 
Simon Harvey, Head of FX Analysis
Ima Sammani, FX Market Analyst
Jay Zhao-Murray, FX Market Analyst

 

 

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