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Forex News February 22, 2022

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Trade ideas 

  • Even if you flip the date today backwards, it still reads 22 02 2022. Russia-Ukraine tensions are still escalating, and the big question now is what will happen next. 
  • One could argue that the base case is that Russia obtains their claim to the separatist territory, with the borders being worked out in detail later. Ukraine will be enraged about the situation, but no aggressive manoeuvring is likely. Then it will be up to Russia to decide how far they want to push the narrative. 
  • Putin may try to poke and prod a little, but he may not go all the way.
  • The West will impose insignificant sanctions on Russia, and the world will gradually move on. The S&P 500 is beginning to fall towards its January lows, which will make things more interesting technically. There is the possibility of an even deeper correction, but the play in all of this is to look for the dip buy on the relief rally. 
  • Gold shorts would also be one to consider, as would yen pairs on the long side. The Australian and New Zealand dollars have been surprisingly resilient throughout this ordeal, and an even stronger rebound may be on the way once geopolitical tensions subside.

Russian central bank

The Russian central bank has stated that it is prepared to take any and all measures to support financial stability. 

Russian stocks are down more than 8% on the day, and there will be plenty of concerns about domestic assets as the West prepares to impose sanctions. Given the latest developments, don’t expect anything major to come back to bite Russia hard. In any case, markets are still jittery, which is understandable.

EU sanctions 

EU sanctions may be limited in response to the situation in eastern Ukraine, according to an EU official.

Reuters reports, citing an EU official on the matter. EU member states’ ambassadors will meet this morning to discuss possible sanctions against Russia.

The scope of the sanctions to be discussed Sanctions may be limited, but some countries may seek more severe penalties. 

Predictable. We’ll have to wait until it’s official for markets to really get a sense of what’s on the table, but as previously stated, the signs point to nothing more than a slap on the wrist.

PBOC 

The People’s Bank of China (PBOC) is urging banks in Shanghai to increase mortgage and developer lending.

People’s Bank of China; PBOC’s Shanghai branch is urging banks in Shanghai to increase mortgage and developer lending.

A fairly direct way of attempting to support the property sector

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