Risk aversion was the tale of the tape yesterday after Ukraine launched its first attack on Russian soil using US missiles. This caused Russia to expand its nuclear doctrine to allow a nuclear response to any attack on its soil. Initial reaction saw a decline in equities and risk currencies with flows favouring CHF, JPY and USD - traditional safe havens.
However, markets calmed by the end of the day after a spokesperson from the US National Security Council commented that Russia’s decision was not a surprise and is more-or-less the same rhetoric the country has used since invading Ukraine. Gains for the safe havens were given up as a result by the close of European trading.
*Daily move - against G10 rates at 7:30am, 20.11.24
** Indicative rates - interbank rates at 7:30am, 20.11.24
GBP rose this morning after all CPI numbers came in higher than expected, reducing the odds of a December rate cut and reducing the total number of rate cuts expected by the Bank of England (BoE) in their easing cycle. Markets now expect only 60 bps worth of rate cuts by the end of 2025.
Risk sentiment is slightly higher today as well, with Reuters reporting that Vladimir Putin is open to a Ukraine ceasefire deal with Trump.
For the rest of the day we have negotiated wage numbers from the eurozone for Q3. However given recent disinflationary data from the area, these numbers may not have that much of an impact on EUR today. And of course we will be looking out for any further geopolitical events and the impact this could have on FX.
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