Trump, Russia and Ukraine – Markets Bet on Russia’s Success

The news about peace negotiations in Eastern Europe is at least surprising. The pro-Russian stance of the US President is much greater than thought. Markets are already playing into Russia’s success. In the background are good data from overseas and unexpected strengthening of the pound.

Market Awaits Russia

The events in the context of peace negotiations across our eastern border may be surprising. Donald Trump’s latest words about Ukraine’s lack of participation in the talks will long be remembered in some circles. From the Polish perspective, such an extremely pro-Russian stance elicits enormous surprise. On the other hand, markets appear more pragmatic than political commentators. Instead of despairing, they have begun purchasing Russian assets. The main stock index in Russia (RTS) has risen by over 25% since the beginning of the year. Meanwhile, the ruble has jumped 17% against the zloty. At the same time, the Ukrainian hryvnia is falling.

Data from North America

Yesterday, we learned about the inflation data in Canada. On one hand, we have an increase of 0.1% in January. On the other hand, it was in line with expectations and to the level of 1.9%. These are not levels that cause analysts’ concern. However, the higher the inflation, the smaller the chance of further interest rate cuts, and this strengthens the currency. At the same time, in the US, a better-than-expected NY Empire State index was published. As a result, we saw a capital flow overseas yesterday. Both the US and Canadian dollars gained value against the euro.

Unexpected Strength of the Pound

Yesterday, we saw data on the UK job market. Contrary to expectations, the unemployment rate did not increase from 4.4% to 4.5%, but it remained steady. Given that we had the fifth anniversary of Brexit in February, it’s very common to compare current levels to those before leaving. Five years ago we had an unemployment rate of 3.9%, which shows a half percentage point deterioration in the situation. However, it’s worth remembering that these 3.9% was the lowest value since the second half of the 70s, so this comparison is not entirely fair. However, there is genuinely bad news: the number of jobless claims rose by 22,000 in January. Nevertheless, the market considered this as good data for the UK currency, leading to a strengthening pound against the euro.

Today, in the macroeconomic data calendar, it’s worth paying attention to:

• 14:30 – US – housing starts,
• 14:30 – US – building permits,
• 20:00 – US – FOMC meeting minutes.

Maciej Przygórzewski – Chief Analyst at InternetowyKantor.pl