The market devastation suffered recently over the Ukraine war and the sanctions, experienced a sudden and sharp reversal overnight. Global equities surged, Bond Yields rose and commodity prices corrected from sharp rallies. The war is in full flight and no apparent peace agreements are in sight, so is this just a market correction, or have markets sniffed something in the wind? Global equities surged and Oil prices retreated back to US$110/barrel, from over US$130/barrel. Bond Yields in the US recovered some more of the lost ground, while other commodity prices cooled. The ECB meet tonight and will perhaps extend and expand QE, to include a surge in spending for energy and the military and postpone any thoughts of rate rises? The US also settled, with the EUR returning to 1.1070, while the GBP headed back towards 1.3200. Is this a ‘dead cat bounce’ or a significant correction?
The softer reserve allowed commodity currencies to rally, with the AUD breaking back above 0.7300, while the NZD heads towards 0.6850. The massive surge in commodity prices is likely to resume unless there is significant progress in the Ukraine. If Russia decides to reciprocate with sanctions against the EU and the US, things are likely to degenerate, really quickly.
All eyes are on the war, but markets are watching the EU and ECB meetings tonight, closely.