Mr. Kallas issued a key prediction for the cease-fire between Russia and Ukraine. According to Reuters, Kaya Kallas, the European Union’s high representative for foreign affairs and security policy, said on Thursday night that she thought Russia was most likely to agree to a cease-fire proposal put forward by the United States, but with related conditions. This statement caused the international community to pay extensive attention to the trend of the situation between Russia and Ukraine.
Us sends message: Russia or delay process
During this period, the United States conveyed an important message to the members of the Group of Seven (G7), that is, the United States believes that Russia may extend the Russia-Ukraine ceasefire process by ambiguous positions. The news certainly adds an element of uncertainty to future ceasefire talks.
The territorial issue is a key red line
Mr. Kallas made clear that Ukraine’s territorial ceding was a red line that must not be crossed. In her view, any deal involving territorial concessions from Ukraine will not be acceptable, a position that also reflects the EU’s tough stance on the conflict between Russia and Ukraine.
The EU’s key role in the ceasefire agreement
Kallas also stressed that the EU plays an indispensable role in the implementation of the ceasefire agreement between Russia and Ukraine. She said any ceasefire agreement would be difficult to implement without EU participation because of European dominance on some key elements.
Market dynamics in anticipation of a ceasefire
At the time of writing, there was already some volatility in the gold market. The price of gold (XAU/USD) was down 0.02% on the day, trading at $2,988 an ounce. This price movement may be related to market expectations about the prospects of a ceasefire between Russia and Ukraine.
Interpretation of financial market risk sentiment
In the field of financial investment, “risk-on” and “risk-off” are two extremely critical concepts, which have a profound in financial terms, “risk appetite” means that investors are full of confidence in the future economic situation, willing to take higher risks, and actively buy risky assets; On the other hand, “risk aversion” indicates that investors are worried about the future and are more inclined to buy assets with lower risks and relatively stable returns to ensure the safety of funds.
Asset performance differences under different risk sentiment
Normally, in a “risk on” market environment, the stock market will welcome most commodity prices, with the exception of gold, will also appreciate on expectations of better economic growth. At the same time, the currencies of large commodity exporting countries will strengthen due to increased demand, and cryptocurrencies will also show an upward trend. However, when the market enters a “risk off” state, the bond market, especially the government bonds of major countries, will be favored by investors and prices will rise. Gold, as a traditional safe-haven asset, will show its unique value, and safe-haven currencies such as the Japanese yen, Swiss franc and U.S. dollar will also appreciate due to capital inflows.
Specific analysis of currency performance under different risk sentiment
In a “risk on” market atmosphere, currencies such as the Australian, Canadian and New Zealand dollars, as well as secondary currencies such as the ruble and South African rand, tend to appreciate. This is mainly because the economies of these countries are heavily dependent on commodity exports, and during the “risk on” period, investors expect economic activity to be more active, and the demand for raw materials will increase significantly, which will push up commodity prices and lead to the appreciation of the related currencies. On the contrary, in a “risk off” market environment, major currencies such as the US dollar, Japanese yen and Swiss franc usually appreciate. As the global reserve currency, investors will buy US Treasury bonds in large quantities in times of crisis, because the US economy is large and the default risk is low. The yen is in demand because domestic investors hold large amounts of Japanese government bonds, which they do not sell easily even during a crisis. The Swiss franc, with its stronger capital protection for investors thanks to the country’s strict banking laws, has attracted inflows and thus appreciated.
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