Estonia's Chief of Foreign Intelligence Mikk Marran said on Wednesday that Russia is moving a further 10 battle groups towards an area near Ukraine where 100 battle groups have already been deployed. The Foreign Intelligence Chief added that Russia is "likely" to launch a "limited" assault against Ukraine, occupying chunks of territory, with an escalation of fighting in the Eastern breakaway provinces "highly likely". The Intelligence Chief warned that Russian success in Ukraine would encourage it to pressure the Baltic states.
Market Reaction
With markets primarily focused on the recent Fed minutes release at the moment, the latest negative geopolitical headlines haven't dampened sentiment yet, with the S&P 500 having jumped about 30 points over the last 30 or so minutes to now trade flat again on the day. While it might be risk on right now given the dovish minutes, warnings of continued Russian escalation could soon recapture the focus and weigh on sentiment once more.
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EUR/USD treads water just above 1.0400 post-US data
Another sign of the good health of the US economy came in response to firm flash US Manufacturing and Services PMIs, which in turn reinforced further the already strong performance of the US Dollar, relegating EUR/USD to the 1.0400 neighbourhood on Friday.
GBP/USD remains depressed near 1.2520 on stronger Dollar
Poor results from the UK docket kept the British pound on the back foot on Thursday, hovering around the low-1.2500s in a context of generalized weakness in the risk-linked galaxy vs. another outstanding day in the Greenback.
Gold keeps the bid bias unchanged near $2,700
Persistent safe haven demand continues to prop up the march north in Gold prices so far on Friday, hitting new two-week tops past the key $2,700 mark per troy ounce despite extra strength in the Greenback and mixed US yields.
Geopolitics back on the radar
Rising tensions between Russia and Ukraine caused renewed unease in the markets this week. Putin signed an amendment to Russian nuclear doctrine, which allows Russia to use nuclear weapons for retaliating against strikes carried out with conventional weapons.
Eurozone PMI sounds the alarm about growth once more
The composite PMI dropped from 50 to 48.1, once more stressing growth concerns for the eurozone. Hard data has actually come in better than expected recently – so ahead of the December meeting, the ECB has to figure out whether this is the PMI crying wolf or whether it should take this signal seriously. We think it’s the latter.
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