Fx Horizon Blog Ep 2

Russia – Ukraine

What. A. Hell. Of. A. Ride.

This is how you can describe the last week in ALL markets.
In last weeks episode I laid out how different outcomes in the Rus-Ukr issue could result in different trades.
The one side was the “peace trade”, if the whole conflict would resolve on a political level, without shootings and deaths. That included selling gold, buying risk in equities, selling the jpy and bonds.
Did it work out? Yes, for a day or two..
Russia did the unexpected last week in the night of Feb 23rd to Feb 24th. Russia attacked Ukraine – all of it.
It started with airstrikes, then sea based landing on the south coast – namely Odessa – and ended with a full invasion, encircling Kyiv.
Fights are still ongoing in the capital and Ukraine is going to hold against russian forces as good as they can.
The trade on that? Exactly as I proposed it – buy gold, jpy, usd, bonds, oil and commodities like wheat and corn. On the other hand, sell risk assets such as equities, eur, aud and nzd.
The trade held on for a good while until like late thursday, when markets thought we are probably seeing the end of that conflict with Russia moving in very very quickly and it seemed that there is no to little resistance from Ukraine.
As I hinted above already, that was not true. Ukrainians are a very proud population, fighting for the capital and Russia seemingly made no progress there for days now.
Western media is also pushing a lot of info about unsung ukrainian heroes, masses of shot down russian aircraft, tanks and armored vehicles – if all that is true remains a mistery with fake news certainly reaching a new high in the internet. There was even a video last night of a nuclear explosion – it was fake.
Speaking about nuclear weapons though, we get closer to our weekend talk.
Putin put the russian nuclear division into a higher alert level, whatever that means in the end.
The EU was busy putting sanctions on Russia during the weekend too, forcing it out of SWIFT (partially only) and issuing an airspace halt for all russian aircraft, same as the UK, Canada and others.
Furthermore, a series of european countries are delivering military equipment and /or support Ukraine with financial aids now – foremost Germany breaking its self set no-military-equipment-support case and ramping up its own yearly military budget by 100bn€.

Update, Monday:
Talks between Russia and Ukraine are ongoing (update – talks are done) on the belarusian / ukrainian border, with Ukraine demanding a ceasfire and withdrawal of all russian forces.

Ukraine also applied for EU membership today.

Equities

Last week was horrible for equities, until it wasn´t anymore.
We saw SPX opening at 4332 last week, before decending 226pts (5,2%) to a low of 4106 on the peak of the invasion selloff on thursday. What happened afterwards, is an incredible rally to new highs for the week into the close on friday reaching a high of 4389 just in the last hour of trading. The range for the week here is 283pts or a nice 6,8% rally into the close. The effectively weekly change is only +51pts (1,17%).