The echo of the Ukraine conflict and its sanction repercussions are heard more and more loudly in the global asset markets. As Russian trade ties with European countries are much stronger than, for example, with the United States, European assets and currencies are first on the line to feel the blow. On Wednesday, we saw the escalation of sanctions rhetoric from EU officials, as well as a new leg of the rally of oil, gas, and other commodities, which exert pressure on the currencies of commodity importers, such as the EU and Britain. EURUSD fell to 1.1060 in the first half of trading session on Wednesday, GBPUSD tested 1.33, however the currencies moved to recovery later in the session as risk perceptions improved. European stock also rebounded despite some weakness early in the session – by 0.4% on average.The yield of 10Y German bunds traded below 0%, US Treasury yield somewhat advanced, gold is on the defensive, losing about 1%. It is clear that investors are still in no hurry to price in the risks of a global recession in asset prices but they do not lose their vigilance either.Despite the news that EU prepares to unveil a 4th package of sanctions against the Russian Federation, the fact that restrictions will concern Russian oligarchs, their “cars, yachts, mansions” and their business eased concerns about bilateral economic damage, which could explain bullish response in European risk assets as the worst-case scenario (energy sector sanctions) has been avoided for now.However, EU metal importers could be upset by decision of Russian Severstal to completely halt deliveries of its products to the EU market and move its focus on Asian markets. By the way, Russia’s share in EU steel imports in 2020 was 17.5% ($4.51 billion out of $25.7 billion), the effect, obviously, should not be negligible.Also, against the backdrop of rising oil prices, German Minister for Economic Affairs and Climate Protection Habek said that Germany is ready to ditch Russian gas and other energy supplies. Disruptions or complete halts of supplies of Russian energy seems to be pushed to the fore among the risks associated with Ukraine conflict, since good part of sanctions pressure against Russia seems to have been deployed and only “nuclear options” remain. This is also confirmed by the jump in oil prices by 16% over two days, when, in fact, speculations about refusing from Russian energy have been ratcheted up:If the second round of today’s talks between the Russian Federation and Ukraine leads to a de-escalation, oil prices are likely to face a correction towards $100 per Brent. At the same time, a failure in the negotiations or unsatisfactory results will most likely allow quotes to grow further, as this will increase speculation about the blocking of Russian hydrocarbons, as, probably, the last effective measure.From a technical standpoint, oil prices are now extremely fragile at current levels, as the deviation from the 50-100-200 SMA is extreme, requiring shocks of increasing strength to continue rising, in addition, the momentum over the past two days (RSI value) has reached 81 points, which also indicates short-term overbought:
Source: Tickmill