Looking at today's quotations on individual markets, one can come to the conclusion that investors expected much harsher and more severe sanctions imposed on Russia for triggering the war in Europe.
Meanwhile, looking at Russia's dollar-settled RTS stock index, we see an increase of almost 20 percent to 890 points. Germany's DAX is up about 0.7 percent to 14130 points. In Poland, the WIG20 also started to strongly recover from yesterday's losses, rising by over 4% to 1900 points. In turn, the Russian ruble also seems to be strengthening after weakening yesterday to 90 RUB per USD. Today, 1 USD costs less than 84 RUB. Also yesterday in the US, US indices seemed to bounce back after Joe Biden's speech, leading to strong gains, e.g. the Nasdaq 100 index from around 13000 points to 14000 points.
Thus, it seems that investors are assuming that the West will stop with posturing and verbal actions to support Ukraine in the ongoing war, rather than actual military assistance. Additionally, Russia is unlikely to be cut off from the SWIFT system and sanctions will not be imposed on energy resources flowing from Russia, cutting them off from funding their spending. Business between Europe, the U.S. and Russia is likely to continue as before, perhaps with only minor difficulties for the scale of the event.
The zloty remains weak in the current situation, but no longer as much as yesterday. The euro should be paid today before noon at PLN 4.65, where yesterday it was over PLN 4.70. In turn, USDPLN retreated from above 4.21 yesterday to 4.16 today. However, this did not change the chances for further strong interest rate hikes in Poland, where the market is beginning to expect a 5% level of 3M WIBOR in six months. Meanwhile, in the Eurozone or the United States, expectations for interest rate hikes seem to be retreating. The chances of the Fed raising interest rates by 50 bps in March have dropped to around 11%, which could also be one of the reasons for the improved sentiment on financial markets.
Daniel Kostecki, Director of the Polish branch of Conotoxia Ltd. (Forex service)
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