Oil, Russia Analysis and News:
- Oil Soars as Putin Launches a Full Scale Invasion of Ukraine
- FX Complancency Prompts Squeeze Higher in Safe-Havens
Oil Soars as Putin Launches a Full Scale Invasion of Ukraine
Overnight, Russian President Putin launched a special military operation to demilitarise Ukraine, in other words a full scale invasion of Ukraine, in which several cities have reported explosions, including the capital, Kyiv. Unsurprisingly, a significant bout of risk aversion has ensued with European equities posting losses of 4-5%, prompting a flight to safety as havens outperform. Meanwhile, oil prices have spiked higher, reflecting the geopolitical risk premium with both Brent and WTI crude futures breaking through the $100/bbl mark. As the conflict unfolds, risks will remain tilted to the upside in the commodity space with Brent crude futures heading towards $110-115/bbl.
Oil Prices Skewed to the Upside
Source: Refinitiv
It must be said, however, that up until today, FX markets had been rather sanguine (with the exception of RUB) in light of the geopolitical backdrop.This does in part signal a degree of complacency, which is made all the more apparent as CFTC positioning data highlights that FX markets are not appropriately positioned for a significant escalation in Russia-Ukraine tensions, with safe-havens among the most crowded shorts in the G10 space (Figure 1). As such, Russian invasion risks beyond Donetsk and Luhansk is best expressed via short EUR/JPY.
Figure 1. Speculative Positioning Across G10 FX
Source: CFTC, Refinitiv
